Question
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,
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, 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. Below are some accounts receivable transactions that you are reviewing.
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JOURNAL
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | |
---|---|---|---|---|---|
1 | Jan. 17 | Sales |
| 9,800.00 |
|
2 |
| Bad Debt Expense |
|
| 9,800.00 |
3 | 18 | Bad Debt Expense |
| 9,800.00 |
|
4 |
| Accounts Receivable-CJs Sports Corp. |
|
| 9,800.00 |
5 | 21 | Cash |
| 10,600.00 |
|
6 |
| Bad Debt Expense |
| 2,300.00 |
|
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. |
| 2,300.00 |
|
12 |
| Bad Debt Expense |
|
| 2,300.00 |
13 | 4 | Cash |
| 2,300.00 |
|
14 |
| Bad Debt Expense |
|
| 2,300.00 |
15 | 13 | Cash |
| 5,540.00 |
|
16 |
| Accounts Receivable-Barbs Best Gear |
|
| 5,540.00 |
17 | 31 | Bad Debt Expense |
| 20,770.00 |
|
18 |
| Accounts Receivable-Healthy Running Inc. |
|
| 5,150.00 |
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 |
Assume that Fan-Tastic Sports Gear Inc. will be using the allowance method this year. Select any items(s) from the list below that should be added to the existing chart of accounts. Check all that apply.
Balance of Aging Accounts
Estimate for Uncollectible Accounts
Allowance for Doubtful Accounts
Net Realizable Value of Receivables
Total Credit Sales
2. 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 list above, if needed.
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JOURNAL
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X
Final Questions
Fan-Tastic Sports Gear Inc. recorded $3,100,000 of sales last year and projects sales to increase by $360,000 in the current year. Last year, 90% of sales were on account, with over 400 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 0.65% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all calculations 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 in (1) above than under the direct write-off method? (Enter 0 if there is no change.) by |
3. | Using the allowance method, the net realizable value of the receivables would appear on which financial statement? |
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