.11 Verizon? 48 PM * 46%-. BACK ASSIGNMENT RESOURCES Problem 7-4 From inception

Question

.11 Verizon? 48 PM * 46%-. BACK ASSIGNMENT RESOURCES Problem 7-4 From inception of operations to December 31, 2017, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Fortner's usual credit terms are net 30 days Problem 7-1 Review Score The balance in Allowance for Doubtful Accounts was $130,000 at January 1, 2017. During 2017, credit sales totaled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off and recoveries of accounts previously written off amounted to $15,000, Fortner installed a computer system in November 2017, and an aging of accounts receivable was prepared for the first time as of December 31, 2017. A summary of the aging is as follows. Objective Classification by Month of Sale Estimated % Uncollectible 296 1096 25% 80% Balance in Each Category November-December 2017 $1,080,000 650,000 420,000 150,000 $2,300,000 January-June Prior to 1/1/17 Based on the review of collectibility of the account balances in the "prior to 1/1/17" aging category, additional receivables totaling $60,000 were written off as of December 31, 2017 . The 80% uncollectible estimate applies to the remaining $90,000 in the category. Effective with the year ended December 31, 2017, Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2017. Show supporting computations in good form. (Hint: In computing the 12/31/17 allowance, subtract the $60,000 write-off.) FORTNER CORPORATION Analysis of Changes in the Allowance fer Doubtful Accounts For the Year Ended December 31, 2017

Explanation / Answer

Answer a. FORTNER CORPORATION Analysis of Changes in the Allowance for Doubtful Accounts For the Year Ended Dec 31, 2017 Balance at Jan 1, 2017        130,000.00 Provision for Doubtful Accounts ($9,000,000 X 2%)        180,000.00 Recovery in 2017 of Bad Debts W/o previously          15,000.00 Sub-total        325,000.00 Less: Amount Written off in 2017 ($90,000 + $60,000)     (150,000.00) Balance at Dec 31, 2017 - Before Change in Accounting Estimate        175,000.00 Increase due to change in Accounting Estimate ($263,600 - $175,000)          88,600.00 Balance at Dec 31, 2017 - Adjusted        263,600.00

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