Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States.

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, 20Y6:

1 2 3 4 5 301 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 91–120 Customer Balance Days Past Due B C D E F G HA 80,000 

The following accounts were unintentionally omitted from the aging schedule:

Customer Due Date Balance Adams Sports & Flies May  22, 20Y6 $5,000 Blue Dun Flies Oct.  10, 20Y6 4,900 Cicada Fish Co. Sept. 29, 20Y6 8,400 Deschutes Sports Oct.  20, 20Y6 7,000 Green River Sports Nov.  7, 20Y6 3,500 Smith River Co. Nov. 28, 20Y6 2,400 Western Trout Company Dec.   7, 20Y6 6,800

Wolfe Sports Jan. 20, 20Y7 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, 20Y6. Journalize the adjusting entry for uncollectible accounts.

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

Answer:

1.

Due Date

Adams Sports & Flies May 22, 20Y6 223 days (9 + 30 + 31 + 31 + 30 + 31 + 30 + 31)

Blue Dun Flies Oct. 10, 20Y6 82 days (21 + 30 + 31)

Cicada Fish Co. Sept. 29, 20Y6 93 days (1 + 31 + 30 + 31)

Deschutes Sports Oct. 20, 20Y6 72 days (11 + 30 + 31)

Green River Sports Nov. 7, 20Y6 54 days (23 + 31)

Smith River Co. Nov. 28, 20Y6 33 days (2 + 31)

Western Trout Company Dec. 7, 20Y6 24 days

Wolfe Sports Jan. 20, 20Y7 Not past due

2. and 3.

Not

PastOver

Customer Balance Due 1–30 31–60 120

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 80,000

Adams Sports & Flies 5,0005,000

Blue Dun Flies 4,900

Cicada Fish Co. 8,400

Deschutes Sports 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 1,290,500 754,400 296,800 125,900 85,000

Percentage uncollectible 1% 2% 10% 80%

Estimate of uncollectible

accounts 105,430 7,544 5,936 12,590 68,000

4. Bad Debt Expense

Allowance for Doubtful Accounts

Uncollectible accounts estimate

($105,430 + $3,600).

5. On the balance sheet, assets would be overstated by $109,030 because the 

allowance for doubtful accounts would be understated by $109,030. In 

addition, the owner’s capital account would be overstated by $109,030

because bad debt expense would be understated and net income overstated 

by $109,030 on the income statement.