1
2
3
4
5
30
31
20,000
7,500
4,000
1,300,000 20,000
7,500
120,000
20,000
750,000
4,000
290,000 40,000
1–30 31–60 61–90
Not
Due
Past
Customer Balance 91–120
Days Past Due
A B C D E
A B C D E F G H
80,000
Over 120
AAA Outfitters
Brown Trout Fly Shop
Zigs Fish Adventures
The following accounts were unintentionally omitted from the aging schedule:
Customer Due Date Balance
Adams Sports & Flies May 22, 2013 $5,000
Blue Dun Flies Oct. 10, 2013 4,900
Cicada Fish Co. Sept. 29, 2013 8,400
Deschutes Sports Oct. 20, 2013 7,000
Green River Sports Nov. 7, 2013 3,500
Smith River Co. Nov. 28, 2013 2,400
Western Trout Company Dec. 7, 2013 6,800
Wolfe Sports Jan. 20, 2014 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, 2013. 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?
Answer:
1.
Customer Due Date Number of Days Past Due
Adams Sports & Flies May 22, 2013 223 days (9 + 30 + 31 + 31 + 30 + 31 + 30 + 31)
Blue Dun Flies Oct. 10, 2013 82 days (21 + 30 + 31)
Cicada Fish Co. Sept. 29, 2013 93 days (1 + 31 + 30 + 31)
Deschutes Sports Oct. 20, 2013 72 days (11 + 30 + 31)
Green River Sports Nov. 7, 2013 54 days (23 + 31)
Smith River Co. Nov. 28, 2013 33 days (2 + 31)
Western Trout Company Dec. 7, 2013 24 days
Wolfe Sports Jan. 20, 2014 Not past due
2. and 3.
Aging of Receivables Schedule
December 31, 2013
Customer Balance
Not
Past
Due
Days Past Due
1–30 31–60 61–90 91–120
Over
120
AAA Outfitters 20,000 20,000
Brown Trout Fly Shop 7,500 7,500
Zigs Fish Adventures 4,000 4,000
Subtotals 1,300,000 750,000 290,000 120,000 40,000 20,000 80,000
Adams Sports & Flies 5,000 5,000
Blue Dun Flies 4,900 4,900
Cicada Fish Co. 8,400 8,400
Deschutes Sports 7,000 7,000
Green River Sports 3,500 3,500
Smith River Co. 2,400 2,400
Western Trout Company 6,800 6,800
Wolfe Sports 4,400 4,400
Totals 1,342,400 754,400 296,800 125,900 51,900 28,400 85,000
Percentage uncollectible 1% 2% 10% 30% 40% 80%
Estimate of uncollectible
accounts 121,000 7,544 5,936 12,590 15,570 11,360 68,000
4. Bad Debt Expense 124,600
Allowance for Doubtful Accounts 124,600
Uncollectible accounts estimate
($121,000 + $3,600).
5. On the balance sheet, assets would be overstated by $124,600, since the allowance for doubtful accounts would be understated by $124,600. In addition, the owner’s capital account would be overstated by $124,600, since bad debt expense would be understated and net income overstated by $124,600 on the income statement.