Acc121 Survey of Accounting: P6-1 Steelhead Company supplies flies and fishing gear

Acc121 Survey of Accounting

P6-1 Allowance Method for Doubtful Accounts:
Steelhead Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Steelhead prepared the following partially completed aging-of-receivables schedule as of the end of business on December 31, 2008.
Steelhead Company has a past history of uncollectible accounts by age category, as follows:
Age Class Percent Uncollectible
Not past due 2%
1-30 days past due 5%
31-60 days past due 10%
61-90 days past due 25%
91-120 days past due 45%
Over 120 days past due 90%

Instructions:
1. Estimate the allowance for doubtful accounts, based on the aging-of-receivables schedule.
2. Assume that the allowance for doubtful accounts for Steelhead Company has a positive balance of $3,199 before adjustment on December 31, 2008. Illustrate the effect on the accounts and financial statements of the adjustment for uncollectible accounts.
3. Steelhead Company reported credit sales of $5,000,000 during 2008. Assume that instead of using the analysis of receivables method of estimating uncollectible accounts, Steelhead uses the percent of sales method and estimates that 1.75% of sales will be uncollectible. Illustrate the effect on the accounts and financial statements of the adjustments for uncollectible accounts using the percent of sales method.
4. Assume that on February 10, 2009, Steelhead wrote off the $9,000 account on Green River Outfitters as uncollectible. Illustrate the effect on the accounts and financial statements of the write-off of the Green River account.
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