Topic 3-2 Accounts Receivable Problem:

Receivables Forever Corp. started business on January 1, 20x3. The following information is provided about its sales during its first two years of operations.

[Hint: Companies can also use % of sales method to estimate bad-debt expense provision directly, instead of using aging schedule which estimate the ending allowance balance to back out bad-debt expense provision. For example, suppose the company estimate that 1% of the reported sales as bad-debt expense provision, then the ending balance would follow as beginning balance + bad-debt expense provision - write-offs.]

Year 20x3

During its first year of operations, 20x3, it had sales of $100,000. All sales were on credit. At the time that the sales were made, it was expected that 5% of the sales would be uncollectible. It collected $75,000 of the 20x3 sales during 20x3 and another $18,000 of the 20x3 sales during 20x4. It wrote off $3,000 of the 20x3 sales during 20x3 and $1,000 of the 20x3 sales during 20x4.

Year 20x4

During its second year of operations, 20x4, it had sales of $200,000. All sales were on credit. At the time that the sales were made, it was expected that 5% of the sales would be uncollectible. It collected $168,000 of the 20x4 sales during 20x4 and another $20,000 of the 20x4 sales during 20x5. It wrote off $8,000 of the 20x4 sales during 20x4.

20x4 year-end aging analysis

At year-end at 20x4, the company performed an aging analysis of existing accounts receivable calculation and found that the Allowance for Uncollectible Accounts account should have an ending balance of $6,000. It proceeded to make with the appropriate adjustment to Allowance and bad-debt expense accounts at the end of 20x4.

Questions:

1. Fill in the following account details for the Allowance for Uncollectible Accounts

	FY 2003	FY 2004
		Before aging analysis	After aging analysis
Opening Balance	$0	(Same as FY 2003 ending)	(Same as FY 2003 ending)
Add: Bad-debt expense provision for the year
Minus: Total write-off during the year			(Same as the cell to the left)
Ending balance

2. Fill in following balance sheet and income statement presentation for respective year

Balance Sheet	20x3 Year END	20x4 Year END
		Before aging analysis	After aging analysis
Accounts Receivable
Minus: Allowance for Uncollectible Accounts
Net Accounts Receivable
Income Statements	FY 2003	FY 2004 before aging analysis	FY 2004
Bad Debt Expense
Other data	FY 2003	FY 2004
Total Cash collected from customers during the year