You have just been hired as the accountant for Fan-Tastic Sports Gear Inc., a wholesaler of sporting goods and apparel. The previous accountant left abruptly in late December, 20Y7, 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 of 20Y8. The following journal shows some of the accounts receivable transactions that you are reviewing.

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jan. 17	Sales		9,700.00
2		Bad Debt Expense			9,700.00
3	17	Bad Debt Expense		9,700.00
4		Accounts Receivable-CJs Sports Corp.			9,700.00
5	21	Cash		10,700.00
6		Bad Debt Expense		2,200.00
7		Accounts Receivable-Four Seasons Sportswear Co.			12,900.00
8	Feb. 15	Accounts Receivable-Healthy Running Inc.		3,000.00
9		Bad Debt Expense		500.00
10		Sales			3,500.00
11	Mar. 4	Accounts Receivable-Four Seasons Sportswear Co.		2,200.00
12		Bad Debt Expense			2,200.00
13	4	Cash		2,200.00
14		Bad Debt Expense			2,200.00
15	13	Cash		5,540.00
16		Accounts Receivable-Barbs Best Gear			5,540.00
17	31	Bad Debt Expense		20,970.00
18		Accounts Receivable-Healthy Running Inc.			5,350.00
19		Accounts Receivable-The Locker Room			4,100.00
20		Accounts Receivable-CJs Sports Corp.			2,780.00
21		Accounts Receivable-Get Your Gear Inc.			7,050.00
22		Accounts Receivable-Ready-2-Go			1,690.00

1. Finalize the journal entries shown on the Fan-Tastic Sports Gear Inc. 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 shown in (1), if needed.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

2. In the trial balance for March, you see that Notes Receivable-Fast Feet Co. has a negative balance of $135, 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 $4,635 in payment of this note receivable. Further investigation reveals that on November 19, 20Y7, this note receivable was received from Fast Feet Co. for $4,500. 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

2. Interest rate of the note: ___%

3. Journalize the entry needed to record information about the note receivable from Fast Feet for the year 20Y7. Assume that the entry on November 19, 20Y7 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest dollar.

PAGE 11

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

4. Journalize the entry needed to record collection of the note at maturity on March 19, 20Y8. Assume that the entry on November 19, 20Y7 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest dollar.

PAGE 3

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

5. Fan-Tastic Sports Gear Inc. 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 Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,240. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.85% 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 Inc.s net income have been under the allowance method assumption previously shown in (1) than under the direct write-off method? (Enter 0 if there is no change.) (Higher, No change or Lower) by $_______
3.	Using the allowance method, the net realizable value of the receivables would appear on which financial statement? (Income Statement, Balance Sheet, Trial Balance, or Schedule of Accounts Receivable)