You have just been hired as the accountant for Fan-Tastic Sports Gear, a wholesaler of sporting goods and apparel. The previous accountant left abruptly, 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. Some of the accounts receivable transactions that you are reviewing follow.

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jan. 17	Sales		9,600.00
2		Bad Debt Expense			9,600.00
3	17	Bad Debt Expense		9,600.00
4		Accounts Receivable-CJs Sports			9,600.00
5	21	Cash		10,700.00
6		Bad Debt Expense		2,200.00
7		Accounts Receivable-Four Seasons Sportswear			12,900.00
8	Feb. 15	Accounts Receivable-Healthy Running		3,000.00
9		Bad Debt Expense		500.00
10		Sales			3,500.00
11	Mar. 4	Accounts Receivable-Four Seasons Sportswear		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			5,150.00
19		Accounts Receivable-The Locker Room			4,100.00
20		Accounts Receivable-CJs Sports			2,780.00
21		Accounts Receivable-Get Your Gear			7,050.00
22		Accounts Receivable-Ready-2-Go			1,890.00

Review the accounts receivable transactions shown in the general journal on the Fan-Tastic Sports Gear panel. Answer the following questions.Recording Uncollectible Receivables

How does the company appear to be handling uncollectible receivables?

a. direct write-off method

b. allowance method

c. percent of sales method

d. aging of accounts receivable method

2. You have made the following observations during your review of the accounting records. In deciding whether Fan-Tastic Sports Gear is handling uncollectible receivables appropriately, which of these observations are key factors in your decision? Select all that apply.

a. An analysis of the companys accounts receivable shows more accounts will be uncollectible than last year.

b. Most of the companys sales are on account.

c. Company sales last year were $3,000,000 and are expected to increase by $350,000 this year.

d. The company sells primarily to smaller businesses, who are more likely to have cash flow problems.

e. Bad debt is a rising expense.

f. Collection agencies are routinely used.

3. After making the observations listed in (2), you have recommended that Fan-Tastic Sports Gear use the allowance method to journalize bad debt expense.

Revised Journal Entries

1. Assume that Fan-Tastic Sports Gear will be using the allowance method this year. Select any items(s) from the following list that should be added to the existing chart of accounts. Select all that apply.

a. Net Realizable Value of Receivables

b. Total Credit Sales

c. Balance of Aging Accounts

d. Estimate for Uncollectible Accounts

e. Allowance for Doubtful Accounts

2. Finalize the journal entries shown on the Fan-Tastic Sports Gear 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, if needed.

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
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6
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8
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