Question
Need assistance on how to resolve! Thank you!! Fan-Tastic Sports Gear Inc. You have just been hired as the accountant for Fan-Tastic Sports Gear Inc.,
Need assistance on how to resolve! Thank you!!
Fan-Tastic Sports Gear Inc.
You have just been hired as the accountant for Fan-Tastic Sports Gear Inc., a wholesaler of sporting goods and apparel. The previous accountant left abruptly in late December, 20Y7, and an accounting intern has been drafting the journal entries since January. You are examining the accounting records before finalizing the journal entries for the first quarter of 20Y8. The following journal shows some of the accounts receivable transactions that you are reviewing.
Journal | |||
Date | Description | Debit | Credit |
Jan. 17 | Sales | 9,800 | |
Bad Debt Expense | 9,800 | ||
17 | Bad Debt Expense | 9,800 | |
Accounts Receivable-CJs Sports Corp. | 9,800 | ||
21 | Cash | 10,800 | |
Bad Debt Expense | 2,100 | ||
Accounts Receivable-Four Seasons Sportswear Co. | 12,900 | ||
Feb. 15 | Accounts Receivable-Healthy Running Inc. | 3,000 | |
Bad Debt Expense | 500 | ||
Sales | 3,500 | ||
Mar. 4 | Accounts Receivable-Four Seasons Sportswear Co. | 2,100 | |
Bad Debt Expense | 2,100 | ||
4 | Cash | 2,100 | |
Bad Debt Expense | 2,100 | ||
13 | Cash | 5,540 | |
Accounts Receivable-Barbs Best Gear | 5,540 | ||
31 | Bad Debt Expense | 21,070 | |
Accounts Receivable-Healthy Running Inc. | 5,350 | ||
Accounts Receivable-The Locker Room | 4,100 | ||
Accounts Receivable-CJs Sports Corp. | 2,780 | ||
Accounts Receivable-Get Your Gear Inc. | 7,050 | ||
Accounts Receivable-Ready-2-Go | 1,790 |
Recording Uncollectable Receivables
Review the accounts receivable transactions shown in the general journal on the Fan-Tastic Sports Gear Inc. panel.
1. How does the company appear to be handling uncollectible receivables?
2. You have made the following observations during your review of the accounting records. In deciding whether Fan-Tastic Sports Gear Inc. is handling uncollectible receivables appropriately, which of these observations are key factors in your decision?
a. Most of the companys sales are on account.
b. An analysis of the companys accounts receivable shows more accounts will be uncollectible than last year.
c. Collection agencies are routinely used.
d. Company sales last year were $3,100,000 and are expected to increase by $360,000 this year.
e. Bad debt is a rising expense.
f. The company sells primarily to smaller businesses, who are more likely to have cash flow problems.
3. After making the observations previously listed in (2), you have recommended that Fan-Tastic Sports Gear Inc. use the ______ to record bad debt expense.
Revised Journal Entries
1. Assume that Fan-Tastic Sports Gear Inc. will be using the allowance method this year. Select the item from the following list that should be added to the existing chart of accounts.
2. Finalize the journal entries shown on the Fan-Tastic Sports Gear Inc. panel and make any necessary changes. If an amount box does not require an entry, leave it blank.
Jan. 17 | Sales | fill in the blank 1483a3fedf8801d_2 | fill in the blank 1483a3fedf8801d_3 |
Accounts Receivable-CJ's Sports Corp. | fill in the blank 1483a3fedf8801d_5 | fill in the blank 1483a3fedf8801d_6 | |
Jan. 21 | Cash | fill in the blank 1483a3fedf8801d_8 | fill in the blank 1483a3fedf8801d_9 |
fill in the blank 1483a3fedf8801d_11 | fill in the blank 1483a3fedf8801d_12 | ||
Accounts Receivable-Four Seasons Sportswear Co. | fill in the blank 1483a3fedf8801d_14 | fill in the blank 1483a3fedf8801d_15 | |
Feb. 15 | fill in the blank 1483a3fedf8801d_17 | fill in the blank 1483a3fedf8801d_18 | |
fill in the blank 1483a3fedf8801d_20 | fill in the blank 1483a3fedf8801d_21 | ||
Mar. 4 | fill in the blank 1483a3fedf8801d_23 | fill in the blank 1483a3fedf8801d_24 | |
fill in the blank 1483a3fedf8801d_26 | fill in the blank 1483a3fedf8801d_27 | ||
Mar. 4 | fill in the blank 1483a3fedf8801d_29 | fill in the blank 1483a3fedf8801d_30 | |
fill in the blank 1483a3fedf8801d_32 | fill in the blank 1483a3fedf8801d_33 | ||
Mar. 13 | fill in the blank 1483a3fedf8801d_35 | fill in the blank 1483a3fedf8801d_36 | |
fill in the blank 1483a3fedf8801d_38 | fill in the blank 1483a3fedf8801d_39 | ||
Mar. 31 | fill in the blank 1483a3fedf8801d_41 | fill in the blank 1483a3fedf8801d_42 | |
fill in the blank 1483a3fedf8801d_44 | fill in the blank 1483a3fedf8801d_45 | ||
fill in the blank 1483a3fedf8801d_47 | fill in the blank 1483a3fedf8801d_48 | ||
fill in the blank 1483a3fedf8801d_50 | fill in the blank 1483a3fedf8801d_51 | ||
fill in the blank 1483a3fedf8801d_53 | fill in the blank 1483a3fedf8801d_54 | ||
fill in the blank 1483a3fedf8801d_56 | fill in the blank 1483a3fedf8801d_57 |
Note Receivable
In the trial balance for March, you see that Notes Receivable-Fast Feet Co. has a negative balance of $135, which would seem to indicate that Fast Feet paid too much. Looking back through the journal entries for March, you find that on March 19 the accounting intern recorded receipt of $6,885 in payment of this note receivable. Further investigation reveals that on November 19, 20Y7, this note receivable was received from Fast Feet Co. for $6,750. You can find no additional information about this note in the accounting records. Assume a 360 day year.
Using the preceding information, compute the term and the interest rate of the note receivable from Fast Feet.
1. Term of the note: fill in the blank af02d303702dfcb_1 days
2. Interest rate of the note: fill in the blank af02d303702dfcb_2 %
3. Journalize the entry needed to record information about the note receivable from Fast Feet for the year 20Y7. Assume that the entry on November 19, 20Y7 is correct. If an amount box does not require an entry, leave it blank. Round all amounts to the nearest dollar.
Dec. 31 | fill in the blank 8a302f0a1ffffb7_2 | fill in the blank 8a302f0a1ffffb7_3 | |
fill in the blank 8a302f0a1ffffb7_5 | fill in the blank 8a302f0a1ffffb7_6 |
4. Journalize the entry needed to record collection of the note at maturity on March 19, 20Y8. Assume that the entry on November 19, 20Y7 is correct. If an amount box does not require an entry, leave it blank. Round all amounts to the nearest dollar.
Mar. 19 | fill in the blank 35bbb1fdc031ff9_2 | fill in the blank 35bbb1fdc031ff9_3 | |
fill in the blank 35bbb1fdc031ff9_5 | fill in the blank 35bbb1fdc031ff9_6 | ||
fill in the blank 35bbb1fdc031ff9_8 | fill in the blank 35bbb1fdc031ff9_9 | ||
fill in the blank 35bbb1fdc031ff9_11 | fill in the blank 35bbb1fdc031ff9_12 |
Final Questions
Fan-Tastic Sports Gear Inc. recorded $3,100,000 of sales last year and projects sales to increase by $360,000 in the current year. Last year, 90% of sales were on account, with over 300 customer accounts. Bad debt expense was $26,187.
1. Assume that Fan-Tastic Sports Gear Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,190. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all computations to the nearest dollar. $fill in the blank b31ab6013f95001_1
2. How much higher (lower) would Fan-Tastic Sports Gear Inc.s net income have been under the allowance method assumption previously shown in (1) than under the direct write-off method? (Enter 0 if there is no change.) by $fill in the blank b31ab6013f95001_3
3. Using the allowance method, the net realizable value of the receivables would appear on which financial statement?
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