Water Way Company has experienced rapid growth in its first few months of operations and has had a significant increase in customers renting canoes and purchasing T-shirts. Many of these customers are asking for credit terms. Alison and Zion Wilson, stockholders and company managers, have decided it is time to review their business transactions and update some of their business practices. Their first step is to make decisions about handling accounts receivable. So far, year to date credit sales have been $14,000. A review of outstanding receivables resulted in the following aging schedule: (Click the icon to view the aging schedule.) Read the requirements. Requirement 1. The company wants to use the allowance method to estimate bad debts. Assume a zero beginning balance for Allowance for Bad Debts. a. Determine the estimated bad debts expense under the percent-of-sales methods at June 30, 2019. Assume that 7% of credit sales will not be collected. (Round to the nearest dollar.) Method Estimated Bad Debts a. Percent-of-sales 980 b. Determine the estimated bad debts expense under the percent-of-receivables methods at June 30, 2019. Assume that 19% of receivables will not be collected. (Round to the nearest dollar.) Method Estimated Bad Debts b. Percent-of-receivables $ 1,691 c. Determine the estimated bad debts expense under the aging-of-receivables methods at June 30, 2019. Assume that 5% of invoices 1-30 days will not be collected, 30% of invoices 31-60 days, 35% of invoices 61-90 days, and 70% of invoices over 90 days. (Round intermediary computations and your final answer to the nearest dollar.) Method Estimated Bad Debts c. Aging-of-receivables Water Way Company has experienced rapid growth in its first few months of operations and has had a significant increase in customers renting canoes and purchasing T-shirts. Many of these customers are asking for credit terms. Alison and Zion Wilson, stockholders and company managers, have decided it is time to review their business transactions and update some of their business practices. Their first step is to make decisions about handling accounts receivable. So far, year to date credit sales have been $14,000. A review of outstanding receivables resulted in the following aging schedule: (Click the icon to view the aging schedule.) Read the requirements. Requirement 1 The company wants to use the allowance method to estimate had debts Assume a zern herinning balance for Allowance for Bad Debts. a. Deter Requirements t7% of cred * Data Table a. Per b. Deter ne that 19% b. Par that 5% of 1-90 days, and 70% of invoices c. Deter over 90 1. The company wants to use the allowance method to estimate bad debts. Determine the estimated bad debts expense under the following methods at June 30, 2019. Assume a zero beginning balance for Allowance for Bad Debts. Round to the nearest dollar. a. Percent-of-sales method, assuming 7% of credit sales will not be collected. b. Percent-of-receivables method, assuming 19% of receivables will not be collected. c. Aging-of-receivables method, assuming 5% of involces 1-30 days will not be collected, 30% of invoices 31-60 days, 35% of invoices 61-90 days, and 70% of invoices over 90 days. 2. Journalize the entry at June 30, 2019, to adjust for bad debts expense using the percent-of-sales method. 3. Journalize the entry at June 30, 2019, to record the write-off of the Moming Dew Daycare invoice. 4. At June 30, 2019, T-accounts for Accounts Receivable and Allowance for Bad Debts before Requirements 2 and 3 have been opened for you. Post entries from Requirements 2 and 3 to those accounts. Assume a zero beginning balance for Allowance for Bad Debts. 5. Show how Water Way Company will report net accounts receivable on the balance sheet on June 30, 2019 Age of Accounts as of June 30, 2019 1-30 31-60 61-90 Over 90 Total Customer Name Days Days Days Days Balance Little Lion's Club S 800 $ 800 Tee Time 1.100 S 600 1,700 Morning Dew Daycare $ 400 400 Lakefront Pavilion 1.100 1.100 Hope Center 600 600 Candy Canoe Club 900 900 Maple Shirts 1.000 300 1.300 Yula's Marina 700 700 700 2,100 $ 5,600 S 1,600 $ 1,300 $ S S 400 $ Total 8,900 c. Agi Print Done Print Done Enter and
