. 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, 2015. Journalize the adjusting entry for uncollectible accounts.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfit- ters 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, 2015:
Figure 1 (See Image)
The following accounts were unintentionally omitted from the aging schedule:
|
Customer |
Due Date |
Balance |
|
Adams Sports & Flies |
May 22, 2015 |
$5,000 |
|
Blue Dun Flies |
Oct. 10, 2015 |
$4,900 |
|
Cicada Fish Co. |
Sept. 29, 2015 |
$8,400 |
|
Deschutes Sports |
Oct. 20, 2015 |
$7,000 |
|
Green River Sports |
Nov. 7, 2015 |
$3,500 |
|
Smith River Co. |
Nov. 28, 2015 |
$2,400 |
|
Western Trout Company |
Dec. 7, 2015 |
$6,800 |
|
Wolfie Sports |
Jan. 20, 2016 |
$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% |
Figure 2
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, 2015. Journalize the
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