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Aging of Receivables; Estimating Allowance for Doubtful Accounts Trophy Fish Company supplies flies and fishing gear...

Aging of Receivables; Estimating Allowance for Doubtful Accounts

Trophy Fish Company supplies flies and fishing gear products 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, 20Y7:

Not Days Past Due
Past
Customer Balance Due 1-30 31-60 61-90 91-120 Over 120
AAA Outfitters 20,100 20,100
Brown Trout Fly Shop 8,000 8,000
Zigs Fish Adventures 4,400 4,400
Subtotals 1,299,900 743,000 292,300 128,900 44,700 15,600 75,400

The following accounts were unintentionally omitted from the aging schedule:

Customer Due Date Balance
Adams Sports and Flies May 22 $4,700
Blue Dun Flies Oct. 10 5,200
Cicada Fish Co. Sept. 29 8,800
Deschutes Sports Oct. 20 6,600
Green River Sports Nov. 7 3,900
Smith River Co. Nov. 28 2,300
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 8
61-90 days past due 29
91-120 days past due 40
Over 120 days past due 79

Required:

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

Customer Due Date Number of Days Past Due
Adams Sports and Flies May 22 days
Blue Dun Flies Oct. 10 days
Cicada Fish Co. Sept. 29 days
Deschutes Sports Oct. 20 days
Green River Sports Nov. 7 days
Smith River Co. Nov. 28 days
Western Trout Company Dec. 7 days
Wolfe Sports Jan. 20 days

2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. If an amount box does not require an entry, leave it blank.

Trophy Fish Company
Aging of Receivables Schedule
December 31, 20Y7
Customer Balance Not Past Due Days Past Due 1-30 Days Past Due 31-60 Days Past Due 61-90 Days Past Due 91-120 Days Past Due Over 120
AAA Outfitters 20,100 20,100
Brown Trout Fly Shop 8,000 8,000
Zigs Fish Adventures 4400 4400
Subtotals 1,299,900 743,000 292,300 128,900 44,700 15,600 75,400
Adams Sports and Flies
Blue Dun Flies
Cicada Fish Co.
Deschutes Sports
Green River Sports
Smith River Co.
Western Trout Company
Wolfe Sports
Totals
Percent uncollectible (%) % % % % % %
Estimate of uncollectible accounts $ $ $ $ $ $ $

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 has a credit balance of $4,600 before adjustment on December 31, 20Y7. Journalize the adjustment for uncollectible accounts.

Dec. 31

5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

On the balance sheet, assets would be   by $ because the allowance for doubtful accounts would be   by $. In addition, the stockholders’ equity (retained earnings) would be   by $ because bad debt expense would be   and net income   by $ on the income statement.

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Solutions

Expert Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Trophy Fish
1. (31 Dec 2017-Due Date)
Customer Due date Number of Days past due
Adam Sports and Files 22-May-17 223
Blue Dun Files 10-Oct-17 82
Cicada Fish Co 29-Sep-17 93
Deschutes Sports 20-Oct-17 72
Green River Sports 07-Nov-17 54
Smith River Co 28-Nov-17 33
Western Trout Co 07-Dec-17 24
Wolfe Sports 20-Jan-18 0
2,3 Customer Balance Not past Due 1-30 31-60 61-90 91-120 over 120
AAA outfittes $                20,100 $                                    20,700
Brown Trout Fly Shop $                  8,000 $                         8,000
Zing Fish Adventure $                  4,400 $              4,400
Subtotals $          1,299,900 $                                  743,000 $          292,300 $                    128,900 $         44,700 $         15,600 $         75,400
Adam Sports and Files $                  4,700 $            4,700
Blue Dun Files $                  5,200 $            5,200
Cicada Fish Co $                  8,800 $            8,800
Deschutes Sports $                  6,600 $            6,600
Green River Sports $                  3,900 $                         3,900
Smith River Co $                  2,300 $                         2,300
Western Trout Co $                  6,800 $              6,800
Wolfe Sports $                  4,400 $                                      4,400
Total $          1,342,600 $                                  747,400 $          299,100 $                    135,100 $         56,500 $         24,400 $         80,100
% Uncollectible 1% 2% 8% 29% 40% 79%
Estimate of Uncollectible Accounts $              113,688 $                                      7,474 $              5,982 $                      10,808 $         16,385 $            9,760 $         63,279
4
Bad Debt Expense Debit $                                  109,088 $113,688-$4,600
Allowance for Uncollectible Accounts Credit $          109,088
5.
Assets to be Overstated by $          109,088
Owner's Capital to be Overstated by $          109,088
Expenses to be Understated by $          109,088
Net Income to be Overstated by $          109,088

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