Solution for QID #22932: You have just been hired as the accountant for Fan-Tastic Sp | StudyHelpMe

You have just been hired as the accountant for Fan-Tastic Sports Gear, a wholesaler of sporting goods and apparel. The previous accountant left abruptly, and an accounting intern has been drafting the journal entries since January. You are examining the accounting records before finalizing the journal entries for the first quarter. Below are some accounts receivable transactions that you are reviewing. PAGE 11 JOURNAL   DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 Jan. 17 Sales   9,700.00   2   Bad Debt Expense     9,700.00 3 17 Bad Debt Expense   9,700.00   4   Accounts Receivable-CJ’s Sports     9,700.00 5 21 Cash   10,700.00   6   Bad Debt Expense   2,200.00   7   Accounts Receivable-Four Seasons Sportswear     12,900.00 8 Feb. 15 Accounts Receivable-Healthy Running   3,000.00   9   Bad Debt Expense   500.00   10   Sales     3,500.00 11 Mar. 4 Accounts Receivable-Four Seasons Sportswear   2,200.00   12   Bad Debt Expense     2,200.00 13 4 Cash   2,200.00   14   Bad Debt Expense     2,200.00 15 13 Cash   5,540.00   16   Accounts Receivable-Barb’s Best Gear     5,540.00 17 31 Bad Debt Expense   20,870.00   18   Accounts Receivable-Healthy Running     5,250.00 19   Accounts Receivable-The Locker Room     4,100.00 20   Accounts Receivable-CJ’s Sports     2,780.00 21   Accounts Receivable-Get Your Gear     7,050.00 22   Accounts Receivable-Ready-2-Go     1,690.00 CHART OF ACCOUNTS Fan-Tastic Sports Gear General Ledger   ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Healthy Running 122 Accounts Receivable-The Locker Room 123 Accounts Receivable-CJ’s Sports 124 Accounts Receivable-Get Your Gear 125 Accounts Receivable-Four Seasons Sportswear 126 Accounts Receivable-Ready-2-Go 127 Accounts Receivable-Barb’s Best Gear 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Office Equipment 194 Accumulated Depreciation-Office Equipment   LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable   EQUITY 310 Rama Gupta, Capital 311 Rama Gupta, Drawing 312 Income Summary   REVENUE 410 Sales 610 Interest Revenue   EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Insurance Expense 534 Office Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense Review the accounts receivable transactions shown in the general journal on the Fan-Tastic Sports Gear panel. Answer the questions below. 1. How does the company appear to be handling uncollectible receivables? a. aging of accounts receivable method b. allowance method c. direct write-off method d. percent of sales method 2. You have made the observations listed below during your review of the accounting records. In deciding whether Fan-Tastic Sports Gear is handling uncollectible receivables appropriately, which of these observations are key factors in your decision? Check all that apply. a. Most of the company’s sales are on account. b. The company sells primarily to smaller businesses, who are more likely to have cash flow problems. c. An analysis of the company’s accounts receivable shows more accounts will be uncollectible than last year. d. Bad debt is a rising expense. e. Company sales last year were $3,000,000 and are expected to increase by $360,000 this year. f. Collection agencies are routinely used. 3. After making the observations listed in (2) above, you have recommended that Fan-Tastic Sports Gear use the ____? to record bad debt expense. 1. Assume that Fan-Tastic Sports Gear will be using the allowance method this year. Select any items(s) from the list below that should be added to the existing chart of accounts. Check all that apply. a. Balance of Aging Accounts b. Estimate for Uncollectible Accounts c. Total Credit Sales d. Net Realizable Value of Receivables e. Allowance for Doubtful Accounts 2. Finalize the journal entries shown on the Fan-Tastic Sports Gear panel and make any necessary changes. Refer to the Chart of Accounts for the exact wording of account titles. You may also use any items from the list above, if needed. PAGE 11 JOURNAL   DATE DESCRIPTION POST. REF. DEBIT CREDIT 1           2           3           4           5           6           7           8           9           10           11           12           13           14           15           16           17           18           19           Fan-Tastic Sports Gear recorded $3,000,000 of sales last year and projects sales to increase by $360,000 in the current year. Last year, 80% of sales were on account, with over 300 customer accounts. Bad debt expense was $26,187. 1. Assume that Fan-Tastic Sports Gear used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,190. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.75% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all calculations to the nearest dollar. 2. How much higher (lower) would Fan-Tastic Sports Gear’s net income have been under the allowance method assumption in (1) above than under the direct write-off method? ____ ?  by ____? 3. Using the allowance method, the net realizable value of the receivables would appear on which financial statement? _____?