Rhys Fries Part 8

January 31, 20X3

And then there were two. The success of the first Rhys Fries restaurant could not be contained within a single location. Ronald realized several months ago that the business was outgrowing its current location and needed to expand. A second location not only would allow for the demand to be met easier, it also provided a space for Ronalds latest venture; A catering segment that provided multi-course meals to corporate or private events.

Ronald has not forgotten his roots however. In addition to the restaurants, and the recently started catering segment, Ronald still maintains the food truck line of the business that gave him his start. His first employee, Peter, is now the director of the food truck and catering division. During the summer, Peter takes to the road and for winter months when there are limited events to utilize the food truck, Peter transitions to the catering segment full time.

Although Peter was great on the carnival circuit, and was an exceptional people person he had some initial struggles with the catering segment, particularly when it came to the administrative side. He often kept poor records of when and who he sent out invoices to. In some cases he sent out invoices to the wrong patrons or to the correct patron but with incorrect amounts, while in other cases the same patron was sent multiple invoices. This led to some significant delays in collection and required a lot of work to reconcile.

Given these struggles, Sarah suggested that Rhys Fries setup an allowance for doubtful accounts. She has prepared an aging schedule of the accounts receivable and estimated the percentage expected to be uncollectable.

8.) Using the aging schedule in Appendix 2, determine the amount required for the allowance for doubtful accounts and complete the required journal entry to set it up.

Appendix 2 - Accounts Receivable aging as at January 31, 20X3 Estimated % Uncollectible 2% 4% Number of Days Outstanding 0-30 31-60 61-90 91-120 Over 120 TOTAL Accounts Receivable $ 36,500 $ 12,500 $ 9,250 $ 4,200 $ 2,750 $ 65,200 5% 10% 15%