Question

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:

1			Not	Days Past Due	Days Past Due	Days Past Due	Days Past Due	Days Past Due
2			Past
3	Customer	Balance	Due	1-30	31-60	61-90	91-120	Over 120
4	AAA Outfitters	20,900.00	20,900.00
5	Brown Trout Fly Shop	7,000.00			7,000.00
6	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~
7
8	Zigs Fish Adventures	4,000.00		4,000.00
9	Subtotals	1,284,400.00	752,900.00	281,800.00	110,100.00	41,200.00	19,800.00	78,600.00

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	$4,600
Blue Dun Flies	Oct. 10	4,900
Cicada Fish Co.	Sept. 29	8,100
Deschutes Sports	Oct. 20	7,000
Green River Sports	Nov. 7	3,300
Smith River Co.	Nov. 28	2,400
Western Trout Company	Dec. 7	7,300
Wolfe Sports	Jan. 20	4,600

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	3
31–60 days past due	9
61–90 days past due	29
91–120 days past due	38
Over 120 days past due	75

1.	Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.
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 $4,800 before adjustment on December 31. Journalize the adjusting entry for uncollectible accounts. Refer to the Chart of Accounts for exact wording of account titles.
5.	Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

Answer 1

1. Determine the number of days past due for each of the following accounts. If an account is not past due, enter a zero.

Answer

Requirement 1.
Customer	Due Date	Number of Days Past Due
Adams Sports & Flies	May 22	223 days
Blue Dun Flies	Oct. 10	82 days
Cicada Fish Co.	Sept. 29	93 days
Deschutes Sports	Oct. 20	72 days
Green River Sports	Nov. 7	54 days
Smith River Co.	Nov. 28	33 days
Western Trout Company	Dec. 7	24 days
Wolfe Sports	Jan. 20	0 days

Requirement 2. Re-cast Ageing Schedule

			Days Past Due	Days Past Due	Days Past Due	Days Past Due	Days Past Due
Customer	Balance	Not Past Due	1-30	31-60	61-90	91-120	Over 120
AAA Outfitters	20,900	20,900	-
Brown Trout Fly Shop	8,000			8,000
~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~
Zigs Fish Adventures	4,000		4,000
Subtotals	1,284,400	752,900	281,800	110,100	41,200	19,800	78,600
Adams Sports & Flies	4,600	0					4,600
Blue Dun Flies	4,900	0			4,900
Cicada Fish Co.	8,100	0				8,100
Deschutes Sports	7,000	0			7,000
Green River Sports	3,300	0		3,300
Smith River Co.	2,400	0		2,400
Western Trout Company	7,300	0	7,300
Wolfe Sports	4,600	4,600
Totals	1,326,600	757,500	289,100	115,800	53,100	27,900	83,200
Percentage uncollectible		1%	3%	9%	29%	38%	75%
Estimate of uncollectible accounts		7,575	8,673	10,422	15,399	10,602	62,400	115,071

Requirement 3 : $115,071

Requirement 4 :

Journal Entry after taking into account the unadjusted credit balance of $3,600 in the Allowance for Bad Debts Account :   

Bad Debt expense Debit $ 119,871

Allowance for Doubtful Debt Credit $ 119,871

($115,071 - $4,800)

Requirement 5

If Requirement 4 regarding the credit of $ 119,871 is omitted, the Allowance for Uncollectible amounts will increase by $ 119,871.

Balance sheet	Overstated by	119,871
Income statement	Understated by	119,871