Problem #5 Farm Fresh Produce Co. sells produce wholesale to local groceries on account. The accounts receivable department had the following information on December 31, 2009:

Total Credit sales Balance of allowance for doubtful accounts Bad debt as a percentage of credit sales

J Company H Company L Company T Company F Company B Company

Days Past Due 34 74 18 22 61 145

Age Class 0-30 30-60 60-90 90-120 120+

$400,000.00 ($950.00) 0.50% Amount 5,000.00 950.00 32,000.00 4,350.00 2,000.00 1,750.00

Percentage Uncollectible 2% 5% 12% 20% 75%

Instructions: 1. Create an aging of receivable report and determine the allowance for doubtful accounts.

2. Determine the allowance for doubtful accounts based on the percentage of sales method. 3. Illustrate the effects on the accounts and financial statements using both methods. 4. Illustrate the effects on the accounts and financial statements assuming Farm Fresh Produce Co. wrote off the balance of T Company on April 3, 2010. 5. Illustrate the effects on the accounts and financial statements assuming that T Company paid off its account on May 22, 2010.