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Aging of receivables; estimating allowance for doubtful accounts Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y4: The following accounts were unintentionally omitted from the aging schedule. Assume all due dates are for the current year except for Wolfe Sports, which is due in the next year. Customer Due Date Balance Adams Sports & Flies May 22 $5,000 Blue Dun Flies Oct. 10 4,900 Cicada Fish Co. Sept. 29 8,400 Deschutes Sports Oct. 20 7,000 Green River Sports Nov. 7 3,500 Smith River Co. Nov. 28 2,400 Western Trout Company Dec. 7 6,800 Wolfe Sports Jan. 20 4,400 Trophy Fish has a past history of uncollectible accounts by age category, as follows: Age Class Percent Uncollectible Not past due 1% 1-30 days past due 2 31-60 days past due 10 61-90 days past due 30 91-120 days past due 40 Over 120 days past due 80 Instructions 1. Determine the number of days past due for each of the preceding accounts. 2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. 3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule. 4. Assume that the allowance for doubtful accounts for Trophy Fish Company has a debit balance of $3,600 before adjustment on December 31. Journalize the adjusting entry for uncollectible accounts. 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 8, Problem 8.2APR
Textbook Problem
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Aging of receivables; estimating allowance for doubtful accounts

Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y4:

Chapter 8, Problem 8.2APR, Aging of receivables; estimating allowance for doubtful accounts Trophy Fish Company supplies flies

The following accounts were unintentionally omitted from the aging schedule. Assume all due dates are for the current year except for Wolfe Sports, which is due in the next year.

Customer Due Date Balance
Adams Sports & Flies May 22 $5,000
Blue Dun Flies Oct. 10 4,900
Cicada Fish Co. Sept. 29 8,400
Deschutes Sports Oct. 20 7,000
Green River Sports Nov. 7 3,500
Smith River Co. Nov. 28 2,400
Western Trout Company Dec. 7 6,800
Wolfe Sports Jan. 20 4,400

Trophy Fish has a past history of uncollectible accounts by age category, as follows:

Age Class

Percent

Uncollectible

Not past due 1%
1-30 days past due 2
31-60 days past due 10
61-90 days past due 30
91-120 days past due 40
Over 120 days past due 80

Instructions

  1. 1. Determine the number of days past due for each of the preceding accounts.
  2. 2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals.
  3. 3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
  4. 4. Assume that the allowance for doubtful accounts for Trophy Fish Company has a debit balance of $3,600 before adjustment on December 31. Journalize the adjusting entry for uncollectible accounts.
  5. 5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

1.

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Due date:

Due date is the maturity date on note/account, on due date the borrower is supposed to pay the debt.

Past due:

Past due is the number of days of not receiving/making payment on the overdue account.

Analysis of receivables method:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as analysis of receivables method. This method is otherwise known as aging of receivables method. Under analysis of receivables method, estimated bad debts would be treated as the desired adjusted balance for allowance for doubtful accounts.

To determine: The number of days each account is past due as of December 31, 20Y4.

Explanation of Solution

Working note:

Calculate number of days past due for each account.

A Sports & Files Account Past due days
Number of days from May 23 to 31 9 days
Number of days from June 1 to 30 30 days
Number of days from July 1 to 31 31 days
Number of days from August 1 to 31 31 days
Number of days from September 1 to 30 30 days
Number of days from October 1 to 31 31 days
Number of days from November 1 to 30 30 days
Number of days from December 1 to 31 31 days
Total 223 days

Table (2)

BD Flies Account Past due days
Number of days from October 11 to 31 21 days
Number of days from November 1 to 30 30 days
Number of days from December 1 to 31 31 days
Total 82 days

Table (3)

C Fish Company Account Past due days
Number of days from September 30 1 day
Number of days from October 1 to 31 31 days
Number of days from November 1 to 30 30 days
Number of days from December 1 to 31 31 days
Total

2.

To determine

To complete: The aging of receivables schedule, by adding the omitted accounts to the bottom of the schedule and update the totals.

3.

To determine

To prepare: An estimate for allowance for doubtful accounts, on the basis of aging of receivables schedule.

4.

To determine

To Journalize: The adjusting entry for uncollectible accounts.

5.

To determine

To identify: The effect on the balance sheet and income statement, if adjusting entry is omitted unintentionally.

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Chapter 8 Solutions

Corporate Financial Accounting
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