Question

Farm Fresh Produce Co. sells produce wholesale to local groceries on account. The accounts receivable department had the following information on December 31, 2009:

Total Credit Sales $400,000

Balance of allowance for doubtful accounts ($950.00)

Bad debt as a percentage of credit sales 0.50%

	Days Past Due	Amount
J Company	34	5,000.00
H Company	74	950.00
L Company	18	32,000.00
T Company	22	4,350.00
F Company	61	2,000.00
B Company	145	1,750.00

Age Class	Percentage Uncollectible
0-30	2%
30-60	5%
60-90	12%
90-120	20%
120+	75%

1. Create an aging of receivable report and determine the allowance for doubtful accounts.
2. Determine the allowance for doubtful accounts based on the percentage of sales method.1. Create an aging of receivable report and determine the allowance for doubtful accounts.

3. Illustrate the effects on the accounts and financial statements using both methods.

4. Illustrate the effects on the accounts and financial statements assuming Farm Fresh Produce Co. wrote off the balance of T Company on April 3, 2010.

5. Illustrate the effects on the accounts and financial statements assuming that T Company paid off its account on May 22, 2010.

Answer 1