Question

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			Not	Days Past Due	Days Past Due	Days Past Due	Days Past Due	Days Past Due
2			Past
3	Customer	Balance	Due	1-30	31-60	61-90	91-120	Over 120
4	AAA Outfitters	20,500.00	20,500.00
5	Brown Trout Fly Shop	7,600.00			7,600.00
6	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~	~~~~~
7
8	Zigs Fish Adventures	3,900.00		3,900.00
9	Subtotals	1,319,300.00	758,200.00	299,000.00	129,300.00	36,900.00	17,400.00	78,500.00

The following accounts were unintentionally omitted from the aging schedule:

Customer	Due Date	Balance
Adams Sports & Flies	May 22, 20Y6	$4,800
Blue Dun Flies	Oct. 10, 20Y6	4,700
Cicada Fish Co.	Sept. 29, 20Y6	8,600
Deschutes Sports	Oct. 20, 20Y6	7,000
Green River Sports	Nov. 7, 20Y6	3,500
Smith River Co.	Nov. 28, 20Y6	2,200
Western Trout Company	Dec. 7, 20Y6	6,900
Wolfe Sports	Jan. 20, 20Y7	4,200

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	12
61–90 days past due	28
91–120 days past due	41
Over 120 days past due	84

	Required:
1.	Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.
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 $3,500 before adjustment on December 31, 20Y6. Journalize the adjusting entry for uncollectible accounts. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
5.	Assuming that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

Answer 1

1
	Customer	Due Date	Days Past Due
	Adams Sports & Flies	May 22 2016	223 Days (9+30+31+31+30+31+30+31)
	Blue Dun Flies	Oct 10 2016	82 Days (21+30+31)
	Cicada Fish Co	Sept 29 2016	93 Days (1+31+30+31)
	Deschutes Sports	Oct 20 2016	72 Days (11+30+31)
	Green River Sports	Nov 7 2016	54 Days (23+31)
	Smith River Co	Nov 28 2016	33 Days (2+31)
	Western Trout Company	Dec 7 2016	24 Days
	Wolfe Sports	Jan 20 2017	No Past Due

2&3
	Aging of Receivables Schedule
	December 31- 2016
	Customer	Balance	Not Past Due
				1 to 30	31 to 60	61 to 90	91 to 120	Over 120
	AAA Outfitters	20,500	20,500
	Brown Trout Fly Shop	7,600			7,600
	Zigs Fish Adventures	3,900		3,900
	Subtotals	13,19,300	7,58,200	2,99,000	1,29,300	36,900	17,400	78,500
	Adams Sports & Flies	4,800						4,800
	Blue Dun Flies	4,700				4,700
	Cicada Fish Co	8,600					8,600
	Deschutes Sports	7,000				7,000
	Green River Sports	3,500			3,500
	Smith River Co	2,200			2,200
	Western Trout Company	6,900		6,900
	Wolfe Sports	4,200	4,200
	Total	13,61,200	7,62,400	3,05,900	1,35,000	48,600	26,000	83,300
	Uncollectable Percentage		1%	2%	12%	28%	41%	84%
	Estimated Uncollectable Account	1,24,182	7,624	6,118	16,200	13,608	10,660	69,972

4	Journal	Debit	Credit
	Bad Debt Expenses	1,27,682
	Allowance for doubtdul debt		1,27,682
	(Estimated Uncollectable receivables)
	(1,24,182 current + 3,500 debit balance )
5	If the adjustment entry above is omitted:
	It will affect the Balance Sheet of the company. Due to the omission of allowance for doubtful debt, the value of debtors will be increased.So that in balance sheet Asset side will be overstated for $1,27,682.Along with that, capital account of the owners will be overstated for the said amount due to this omission, net income will be overstated on income statement.
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