Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 78

Recording and Reporting Credit Sales and Bad Debts Using the Aging of Accounts Receivable Method (Chapters 6 and 8)
Okay Optical, Inc., (OOI) began operations in January 2013, selling inexpensive sunglasses to large retailers like Walgreens and other smaller stores. Assume the following transactions occurred during its first six months of operations.

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

2. Estimate the Allowance for Doubtful Accounts required at June 30, 2013, assuming the following uncollectible rates: one month, 1 percent; two months, 5 percent; three months, 20 percent; more than three months, 40 percent.
3. Show how OOI would report its accounts receivable on its June 30 balance sheet. What amounts would be reported on an income statement prepared for the six-month period ended June 30, 2013
4. Bonus Question: In July 2013, OOI collected the balance due from Bravis Pharmaco but discovered that the balance due from Tony's Pharmacy needed to be written off. Using this information, determine how accurate OOI was in estimating the Allowance for Doubtful Accounts needed for each of these two customers and in total.