You have just been hired as the accountant for Fran-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.

Fan-Tastic Sports Gear You have just been hired as the accountant for Fan-Tastic Sports Gear, a wholesaler of sporting goods and apparet The previous accountant left abruptly, and an accounting intorn 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 foliow PHOE11 JOURNAL ACCOUNTING EQUATION DESCRIPTION POST. RER CREDIT ASSETS LIABILITIES EQUITY DEBIT 9,800.00 9.800.00 1 9,800.00 9,800.00 10,500.00 2.500.00 DATE Jan 17 Sales Bad Debt Expense 17 Bad Debt Expense Accounts Receivable Os Sports 21 Cash Bad Debt Expense Accounts Receivable-Four Seasons Sportswear feb. 15 Accounts Receivable Healthy Running Bad Debt Expense Sales Mich Accounts Receivable Four Seasons Sportswear Bad Debt Expense 12,900.00 1 3,000.00 500.00 2.300.00 11 2,300.00 11 4 Gash 2.500.00 10 2.300,00 11 5.540.00 1 18 5.540.00 1 20.770.00 . Bad Debt Expense 13 Cash Accounts Receivable-Barb's Best Gear 31 Bad Debt Expense Accounts Receivable-Healthy Running Accounts Receivable The Locker Room Accounts Receivable-O's Sports Accounts Receivable Get Your Gear Accounts Receivable-Ready2-60 . 5,150.00 4.100.00 1 ! 2.780.00 1 ! 7,050.00 1,690.00 ! Chart of Accounts CHART OF ACCOUNTS Fan-Tastic Sports Gear General Ledger REVENUE 410 Ses 60 interest Revenue ASSETS 110 Cash 111 Polly Cash 121 Accounts Receivable Healthy Running 122 Accounts Receivable-Toe Locker Room 123 Accounts Receivable-CJ Sports 124 Accounts Recevable-Get Your Gear 125 Accounts Receivable-Four Seasons Sportswear 120 Accounts Receivable.Ready-2-60 127 Accounts Receivable Barb's Best Go 132 Notes Racervatio-Fast Fort Co. 136 Interest Recevable 141 Merchandise Inventory 145 ofice Supplies 151 Prepaid Insurance 181 Land 193 Once upment 194 Accumulated Depreciation-ice Equipment EXPENSES 510 Cost of Merchandise Sold 520 Ses Salines Exponse 521 Advertising Expense 523 Divery Expense 524 Repars Expense 529 Selling Expenses 530 Office Series Expense 531 Rent Expense 532 Depreciation Expense-Omice Equipment 533 Insurance Expense 554 Office Supplies Expertise 536 Credit Card Expense 537 Cash Short and Over 530 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense LIABILITIES 210 Accounts Payable 211 Salories Payable 213 Sales Tax Payati 214 Interest Payable 215 Notes Payable EQUITY 310 Rama Gupta Capital 311 Rama Gupta Drawing 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? Check all that apply Most of the company's sales are on account Collection agencies are routinely used Company sales last year were $2,900,000 and are expected to increase by $350,000 this year Bad debt is a rising expense The company selis primary to smaller businesses who are more likely to have cash flow problems An analysis of the company's accounts receivable shows more accounts will be uncollectible than last year 3. After making the observations listed in (2) you have recommended that Fan-Tastic Sports Cear use the to journalze 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. Check all that apply Balance of Aging Accounts Not Realizablo Value of Receivables Allowance for Doubtful Accounts Total Credit Sales Estimate for Uncollectible Accounts 2. Finalize the journal entries shown on the Fan-Tastic Sports Goar panel and make any necessary changes. Refer to the Chart of Accounts for the exact wording of account Melos You may also use any tems from the preceding As it needed PAGE 11 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY . 12 11 14 3 16 17 11 19 Recording Uncollectible Receivables Review the accounts receivable transactions shown in the general journal on the Fan-Tastic Sports Gear panel. Answer the following questions How does the company appear to be handling uncollectible receivables ? O aging of accounts receivable method percent of sales method direct write-off method allowance method Note Receivable In the trial balance for March, you see that Notes Receivable-Fast Feet Co has a negative balance of S105, 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 $3,605 in payment of this note receivable. Further investigation reveals that on November 19 20Y1, this note recevable was received from Fast Feet Co for $3,500 You can find no additional information about this note in the accounting records. Assume a 360 day year Using the preceding information compute the form and the interest rate of the noto receivable from Fost Foot 1 Term of the note days 2 Interest rate of the note 3. Journaize the entry needed to record information about the note receivable from Fast Foer for the year 2071 Assume that the entry on November 19, 2017 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, RER DEBIT CREDIT ASSETS LIABILITIES EQUITY 2 4 Journalize the entry needed to record collection of the note at maturty on March 19, 2072. Assume that the entry on November 19, 2011 is correct. Refer to the Chart of Accounts of exact wording of account titles. Round all amounts to the nearest collar PAGE 3 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. RER DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 1 Final Questions Fan-Tastic Sports Gear recorded $2,900,000 of sales last year and projects sales to increase by $350,000 in the current year Last year, 90% of sales were on account, with over 300 customer accounts Bad debt expense was $20,187 1. Assume that Fan-Tastic Sports Gear 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 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 317 Round all computations to the nearest dollar $ 2 How much higher flower) would Fan-Tastic Sports Gear's net income have been under the allowance method assumption in (1) than under the direct write-off method? (Enter "Oif there is no change by $ 3. Using the allowance method, the net realizabie value of the receivables would appear on which financial statement