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Fan-Tastic Sports Gear You have just been hired as the accountant for Fan-Tastic Sports Gear, a wholesaler of sporting goods and apparel. The previous accountant left abruptly, 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. Some of the accounts receivable transactions that you are reviewing follow. JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 Jan. 17 Sales 9,700.00 1 2 Bad Debt Expense 9,700.00 1 3 17 Bad Debt Expense 9,700.00 4 Accounts Receivable-Cl's Sports 9,700.00 + 5 21 Cash 10,700.00 1 6 Bad Debt Expense 2,200.00 1 7 Accounts Receivable-Four Seasons Sportswear 12,900.00 1 8 Feb. 15 Accounts Receivable-Healthy Running 3,000.00 1 9 Bad Debt Expense 500.00 1 10 Sales 3,500.00 1 11 Mar. 4 Accounts Receivable-Four Seasons Sportswear 2,200.00 12 Bad Debt Expense 2,200.00 1 13 4 Cash 2,200.00 1 14 Bad Debt Expense 2,200.00 1 13 4 Cash 2,200.00 1 14 Bad Debt Expense 2,200.00 1 15 13 Cash 5,540.00 1 1 16 Accounts Receivable-Barb's Best Gear 5,540.00 1 17 31 Bad Debt Expense 20,870.00 + 18 Accounts Receivable-Healthy Running 5,250.00 1 19 Accounts Receivable-The Locker Room 4,100.00 1 20 Accounts Receivable-Cl's Sports 2,780.00 + 21 Accounts Receivable-Get Your Gear 7,050.00 1 22 Accounts Receivable-Ready-2-GO 1,690.00 + Chart of Accounts CHART OF ACCOUNTS Fan-Tastic Sports Gear General Ledger ASSETS REVENUE 110 Cash 410 Sales 111 Petty Cash 610 Interest Revenue 121 Accounts Receivable-Healthy Running 122 Accounts Receivable-The Locker Room EXPENSES 123 Accounts Receivable-CJ's Sports 510 Cost of Merchandise Sold 124 Accounts Receivable-Get Your Gear 520 Sales Salaries Expense 125 Accounts Receivable-Four Seasons Sportswear 521 Advertising Expense 126 Accounts Receivable-Ready-2-Go 523 Delivery Expense 127 Accounts Receivable-Barb's Best Gear 524 Repairs Expense 132 Notes Receivable-Fast Feet Co. 529 Selling Expenses 136 Interest Receivable 530 Office Salaries Expense 141 Merchandise Inventory 531 Rent Expense 145 Office Supplies 532 Depreciation Expense-Office Equipment 151 Prepaid Insurance 533 Insurance Expense 141 Merchandise Inventory 531 Rent Expense 145 Office Supplies 532 Depreciation Expense-Office Equipment 151 Prepaid Insurance 533 Insurance Expense 181 Land 534 Office Supplies Expense 193 Office Equipment 536 Credit Card Expense 194 Accumulated Depreciation Office Equipment 537 Cash Short and Over 538 Bad Debt Expense LIABILITIES 539 Miscellaneous Expense 210 Accounts Payable 710 Interest Expense 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Rama Gupta, Capital 311 Rama Gupta, Drawing Review the accounts receivable transactions shown in the general journal on the Fan-Tastic Sports Gear panel. Answer the following questions. How does the company appear to be handling uncollectible receivables? direct write-off method aging of accounts receivable method percent of sales method allowance method Points: 1/1 2. You have made the following observations during your review of the accounting records. In deciding whether Fan-Tastic Sports Gear is handling uncollectible receivables appropriately, which of these observations are key factors in your decision? Check all that apply. Collection agencies are routinely used. Most of the company's sales are on account. Bad debt is a rising expense. The company sells primarily to smaller businesses, who are more likely to have cash flow problems. Company sales last year were $3,000,000 and are expected to increase by $350,000 this year. An analysis of the company's accounts receivable shows more accounts will be uncollectible than last year. Points: 1/1 After making the observations listed in (2), you have recommended that Fan-Tastic Sports Gear use the allowance method to journalize d debt expense. Points: 171 1. Assume that Fan-Tastic Sports Gear will be using the allowance method this year. Select any items(s) from the following list that should be added to the existing chart of accounts. Check all that apply. Estimate for Uncollectible Accounts Allowance for Doubtful Accounts Balance of Aging Accounts Total Credit Sales Net Realizable Value of Receivables 2. Finalize the journal entries shown on the Fan-Tastic Sports Gear panel and make any necessary changes. Refer to the Chart of Accounts for the exact wording of account titles. You may also use any items from the preceding list, if needed. Question not attempted, PAGE 1 JOURNAL Score: 0/236 ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 2 9 10 11 12 13 14 15 16 17 16 19 Note Receivable Shaded cells have feedback. In the trial balance for March, you see that Notes Receivable-Fast Feet Co. has a negative balance of $105, 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 $3,605 in payment of this note receivable. Further investigation reveals that on November 19, 20Y1, this note receivable was received from Fast Feet Co. for $3,500. 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: days Points: 071 2. Interest rate of the note: % Points: 0/1 3. Journalize the entry needed to record information about the note receivable from Fast Feet for the year 20Y1. Assume that the entry on November 19, 20Y1 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest dollar. Question not attempted. PAGE 11 JOURNAL Score: 0/25 ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 RPoints: 0/5 4. Journalize the entry needed to record collection of the note at maturity on March 19, 2012. Assume that the entry on November 19, 20Y1 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest dollar. Question not attempted. PAGE 3 JOURNAL Score: 0/49 ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 Fan-Tastic Sports Gear recorded $3,000,000 of sales last year and projects sales to increase by $350,000 in the current year. Last year, 80% of sales were on account, with over 300 customer accounts. Bad debt expense was $26,187. 1. Assume that Fan-Tastic Sports Gear 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. $ 2. How much higher (lower) would Fan-Tastic Sports Gear's net income have been under the allowance method assumption in (1) than under the direct write-off method? (Enter O if there is no change.) by $ 3. Using the allowance method, the net realizable value of the receivables would appear on which financial statement