Question

Allowance for Doubtful Accounts

The Company makes ongoing estimates relating to the collectability of accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the reserve, the Company considers historical levels of credit losses and significant economic developments within the retail environment that could impact the ability of its customers to pay outstanding balances and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Because the Company cannot predict future changes in the financial stability of its customers, actual future losses from uncollectible accounts may differ from estimates. If the financial condition of customers were to deteriorate, resulting in their inability to make payments, a larger reserve might be required. In the event the Company determines a smaller or larger reserve is appropriate, it would record a benefit or charge to selling, general and administrative expense in the period in which such a determination was made. As of December 31, 2016 and 2015, the allowance for doubtful accounts was $11.3 million and $5.9 million, respectively.

Under Armour Inc. also disclosed the following details (p. 95) in their 2016 Annual Report:

Schedule II

Valuation and Qualifying Accounts

(In thousands)

                                                                                Balance at           Charged to           Write-Offs          Balance at

Beginning             Costs and               Net of    End of

of Year               Expenses              Recoveries                Year

Allowance for doubtful accounts

For the year ended December 31, 2016     $ 5,930      $ 23,575               $ (18,164)            $ 11,341

Instructions: Assume that the balance in accounts receivable was $440,000 at 12/31/15, and $634,000 at 12/31/16. Sales for the 2016 year, all on account, amounted to $5,000,000 (all amounts in thousands). Record the following entries below for Under Armour for 2016 and indicate the impact (é = increase, or ê = decrease) of the entries on the balance sheet and income statement categories.

1. Credit Sales for 2016
2. Write-offs of uncollectible accounts for the year
3. Collections on accounts receivable for the year (you need to calculate this number)
4. Adjusting entry to record Bad Debt Expense

(4 pts. each)

#

ACCOUNT NAME

DEBIT

CREDIT

BALANCE SHEET

INCOME STMT

A

=

L

+

Eq

R

-

Ex

Answer 1

(3) Adjustment Entry to Augustment Entry to record the Baddepts Expense are Follows Date (In thausand) DY Particulars Amant Amount Baddipte anc Dr12753 To Debtor 12753 Being Baddipte incurred) Profit and less the Dr 12753 To Baddipte 12753 (Being Baddept chariged to profit from A/C)

(4) Calculation of Buddipta in Form - (culation of Buddipte in Equation Equation are as follows:- Debit (t) Debit Baddepta = Allowance of Net of Baddept in t Recovery - Credit Allowun as of Doubtful Debte in the End = $5930 7910164 -411341 = $12753 Begnning

(1) statement in tatement showing the amount of Baddepts, so this Purpose we shall prepare Allowances For Doubtful Account In is thogs Figure In thousand and Date Particulars Amount is at Partulars 11ullo To Balbid 112753 | 31/ello To Net of Recoveries 5930 18164 31/18/16 By Baddepts (Balancing figure) 11341 31/12/16 Bg Baloid Total 24094 Total Total 124094 The amount shall be write off as uncollectiable Account for the year is $12 153

(2) Calculation ecrelation of of Account Receivable for the year Account Receivable ALL Date particulars 1000) IF( Arrant 01/01/2016 To Balbid 617/2010 To xales JF Amount Dute Particulars 440000 By B 5000000 31/12/15 By Baddepts 31/1216 By Collection of 12753 4739247 Å count Receivblo |31/12/16 By Bal aid 1634000 Total 5440000 Total 544 CRDO
mMy answer contained statement showing Allownaces For doubtful debts account,calculation o account receivable for the year 2016,adjustment entry of baddepts expenses, calculation of baddeprts in equation form.