Question

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	20,900		20,900
Brown Trout Fly Shop	7,400						7,400
Zigs Fish Adventures	3,600				3,600
Subtotals	1,307,800		759,500		281,400		125,000		37,500		24,600		79,800

The following accounts were unintentionally omitted from the aging schedule:

Customer	Due Date		Balance
Adams Sports and Flies		May 22	$4,600
Blue Dun Flies		Oct. 10	4,800
Cicada Fish Co.		Sept. 29	8,300
Deschutes Sports		Oct. 20	7,200
Green River Sports		Nov. 7	3,900
Smith River Co.		Nov. 28	2,700
Western Trout Company		Dec. 7	6,400
Wolfe Sports		Jan. 20	4,100

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	11
61-90 days past due	30
91-120 days past due	39
Over 120 days past due	77

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	20,900	20,900
Brown Trout Fly Shop	7,400			7,400
Zigs Fish Adventures	3600		3600
Subtotals	1,307,800	759,500	281,400	125,000	37,500	24,600	79,800
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 $4,000 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.

Answer 1

1.

The number of days past due is the number of days between the due date of the account and the date of analysis.

The number of days past due for below-mentioned companies are shown below:

Customer	Due Date	Date of Analysis	Days past due
AS and Flies	May-22	Dec-31	223
BD Flies	Oct-10	Dec-31	82
CF Co.	Sep-29	Dec-31	93
DS	Oct-20	Dec-31	72
GR Sports	Nov-07	Dec-31	54
SR Co.	Nov-28	Dec-31	33
WT Co.	Dec-07	Dec-31	24
WS	Jan-20	Dec-31	-20

Days past due is computed as follows:

Customer	May	June	July	August	September	October	November	December
AS and Flies	9	30	31	31	30	31	30	31
BD Flies						21	30	31
CF Co.					1	31	30	31
DS						11	30	31
GR Sports							23	31
SR Co.							2	31
WT Co.								24
WS

2. Updated Ageing of Receivables Schedule after adding all the omitted accounts is as shown below:

Ageing of Receivables Schedule
		Not	Days Past Due
		Past
Customer	Balance	Due	Jan-30	31-60	61-90	91-120	Over 120
AAA Outliners	20,900	20,900
BTF Shop	7,400			7,400
ZF Adventures	3,600		3,600
Subtotals	1,307,800	759,500	281,400	125,000	37,500	24,600	79,800
AS and Flies	4,600						4,600
BD Flies	4,800				4,800
CF Co.	8,300					8,300
DS	7,200				7,200
GR Sports	3,900			3,900
SR Co.	2,700			2,700
WT Co.	6,400		6,400
WS	4,100	4,100
Total	1,349,800	763,600	287,800	131,600	49,500	32,900	84,400
Percent Uncollectible		1	2	11	30	39	77
Estimate of Uncollectible accounts	120,537	7,636	5,756	14,476	14,850	12,831	64988

3.

Now allowance for doubtful accounts are computed by multiplying total amount of each class group by an estimated percentage of uncollectible accounts.

Estimated Percentage of each class group is shown below:

Total	1,349,800	763,600	287,800	131,600	49,500	32,900	84,400
Percent Uncollectible		1	2	11	30	39	77
Estimate of Uncollectible accounts	120,537	7,636	5,756	14,476	14,850	12,831	64988

Therefore, allowance for doubtful accounts is $120,537

4. The amount of adjusting entry is the difference between adjusted balances of allowance for doubtful accounts minus the unadjusted balance of the allowance for doubtful accounts.

Particulars	Amount	Comments
Allowance for Doubtful Accounts	120,537	Using Ageing Schedule
Unadjusted Allowance for Doubtful Accounts	4,000	Credit Balance
Amount of adjusting entry	116,537

The amount of the adjusting entry for uncollectible accounts is $116,537 which is journalized as under:

General Journal
Year	Particulars	L.F	Debit ($)	Credit ($)
Dec-31	Bad Debt Expense		116,537
	Allowance for doubtful accounts			116,537
	(For Bad debt expense recorded under the allowance for the doubtful account)

5.

On the balance sheet, assets would be overstated by $116,537 because the allowance for doubtful accounts would be understated by $116,537. In addition, the stockholders’ equity (retained earnings) would be overstated by $116,537 because bad debt expense would be understated and net income overstated by $ 116,537 on the income statement.