Question

Griswold's began operations in January, selling inexpensive sunglasses to large retailers like Walgreensand other smaller stores. Assume the following transactions occurred during its first six months of operations.

January 1	Sold merchandise to Walgreens for $19,000; the cost of these goods to Griswold's was $11,100.
February 12	Received payment in full from Walgreens.
March 1	Sold merchandise to Bravis Pharmaco on account for $2,900; the cost of these goods to Griswold's was $1,350.
April 1	Sold merchandise to Tony’s Pharmacy on account for $7,900. The cost to Griswold's was $4,350.
May 1	Sold merchandise to Anjuli Stores on account for $1,900; the cost to Griswold's was $1,150.
June 17	Received $6,450 on account from Tony’s Pharmacy.

1. Complete the following aged listing of customer accounts at June 30.

Estimate the Allowance for Doubtful Accounts required at June 30 assuming the following uncollectible rates: one month, 3 percent; two months, 4 percent; three months, 20 percent; more than three months, 30 percent.

2. Estimate the Allowance for Doubtful Accounts required at June 30 assuming the following uncollectible rates: one month, 3 percent; two months, 4 percent; three months, 20 percent; more than three months, 30 percent.

3a.

Show how Griswold's would report its accounts receivable on its June 30 balance sheet

3b.	What amounts would be reported on an income statement prepared for the six-month period ended June 30?

Answer 1

As on June 30th, following the status: -

Date	Sold to	Amount $	Date of receipt	No. of months from Sale	Dobutful Account Allowanace
1 Jan	Walgreens	19,000	Feb 12th		0
1 Mar	Bravis Pharma Co.	2,900		4 months	2900*0.3=870
1 Apr	Tony's Pharmacy	7,900	June 17	3 months -1450	1450*0.2 =290
1 May	Anjuli Stores	1900		2 Months	1900*0.04=76

Total allowances for doubful accounts = $1236

Accounts receivable on June 30th would be as follows: -

Total sales = 31700

Total receipts = 25450

Allowance for doubtful accounts = $1236

Accounts receivable as on June 30th = 31,700-25,450-1,236 = $5014

The amounts that would be reported on an income statement prepared for the six month period ended June 30 are as follows:

Particuars	Amount $	Particulars	Amount $
Cost of goods sold	17,950	Sales	31,700
Doubtful account allowance	1,236