At the end of 2009, Extreme Fitness has adjusted balances of $800,000 in Account

Question

At the end of 2009, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2010, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $5,000

Assuming no other transactions occurred between December 31, 2009, and January 3, 2010, show how Extreme Fitness would have reported its receivable accounts on January 3, 2010. As of that date, what amount did Extreme Fitness expect to collect?

Explanation / Answer

R1. Show how the company would have reported its receivable accounts on December 31, 2009. As of that date, what amount did Extreme Fitness expect to collect? Accounts Receivable $ 800,000 Less: Allowance for Doubtful Accounts (55,000) Net Accounts Receivable = 800000-55000= $745,000 R2. Prepare the journal entry to write off the accounts on January 2, 2010. Accounts Receivable (-A) 5,000 Allowance for Doubtful Accounts (-xA, +A) 5,000 R3. Assuming no other transactions occurred between December 31, 2009, and January 3, 2010, show how Extreme Fitness would have reported its receivable accounts on January 3, 2010. As of that date, what amount did Extreme Fitness expect to collect? Has this changed from December 31, 2009? Explain why or why not. Accounts Receivable $ 795,000 Less: Allowance for Doubtful Accounts (50,000) Net Accounts Receivable $ 745,000

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