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

Exercise 67

Interpreting Disclosure of Allowance for Doubtful Accounts
Heelys, Inc. , designs and sells footwear with the wheel in the heel, worn by annoying kids at shopping malls. It recently disclosed the following information concerning the Allowance for Doubtful Accounts on its Form 10-K annual report.

Required:
1. Create a T-account for the Allowance for Doubtful Accounts and enter into it the 2008 amounts from the above schedule. Then write the T-account in equation format to prove that the above items account for the changes in the account-
2. Heelys reported sales of $70 million in 2008. Why might its Bad Debt Expense equal zero that year
3. Record summary journal entries for 2009 related to ( a ) estimating Bad Debt Expense and ( b ) writing off specific balances.
4. Supply the missing dollar amount noted by for 2010.
5. If Heelys had written off an additional $20 of Accounts Receivable during 2010, how would Net Receivables have been affected How would Net Income have been affected