Fan-Tastic Sports Gear Inc. recorded $3,100,000 of sales last year and projects
ID: 2579058 • Letter: F
Question
Fan-Tastic Sports Gear Inc. recorded $3,100,000 of sales last year and projects sales to increase by $360,000 in the current year. Last year, 70% of sales were on account, with over 400 customer accounts. Bad debt expense was $26,187.
1. Assume that Fan-Tastic Sports Gear Inc. used the allowance method last year, and the allowance account at the end of the year had a debit balance of $2,240. The company estimated uncollectible accounts expense using the percent of credit sales method and expected 0.85% of credit sales to be uncollectible. What is the amount of the adjusting entry to provide for doubtful accounts on December 31? Round all calculations to the nearest dollar.
2. How much higher (lower) would Fan-Tastic Sports Gear Inc.’s net income have been under the allowance method
Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Amount Sales 3,100,000.00 Sales on account = 3.1m*.70 2,170,000.00 Uncollectibel accounts = 2170,000*.85% 18,445.00 Dr Cr Bad Debts Expense DR 18,445.00 To Allowance for dountful accounts 18,445.00 Higher net income under allowance method = 26187 - 18445 7,742.00
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