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Indications that an account may be uncollectible include all of the following except
 
a. the customer closes its business.
b. the customer is making small but regular payments.
c. the customer files for bankruptcy.
d. the customer cannot be located.

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Deanna Hettinger
Deanna HettingerLv2
12 Mar 2020

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AVF Inc. manufactures several lines of packing equipment. Thecompany considers product reliability and outstanding customerservice to be critical to its success. The customer servicedepartment is responsible for:

-Providing prospective customers with product information.

-Monitoring spare parts availability

-Providing equipment operating and maintenance information tocustomers

-Developing aand delivering customer training courses

-Responding to customer complaints and making service calls

Handling customer warranty claims

-Maintaining good customer relations

The company recently made a sizeable investment to upgrade itscustomer service department computer system. the upgrade isexpected to improve operational efficiency and customersatisfaction. The outputs of the new system include managementreports used to monitor performance in the areas listed above. Theaudit committee has asked the internal audit function to audit theoperational effectiveness and efficiency of the customer servicedepartment. The engagement covers the following areas:

-Security of assets, includinf information

-Compliance with applicable laws and company policies

-Reliability of Financial records

-Effectiveness of performing assigned responsibilities

-Valuation of the spare parts inventory

a) Discuss why each of the fives areas specified by theaudit committee may or may not be appropriate for this assuranceengagement.

b) Identify three other areas of the customer servicedepartment that may warrant the internal auditor'sattention.

c) What are the primary audit tasks the internal auditorshould perform to avaluate the operational effectiveness andefficiency of the customer service department in meeting thefollowing responsibilities?

-Developing and delivering customer training courses.

-Responding to customer complaints and making service calls.

-Handling customer warranty claims.

Prior to recording the following, Elite Electronics, Inc. had a credit balance of $2,000 in its Allowance for Doubtful Accounts.
Required:
Prepare journal entries for each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
a.
On August 31, a customer balance for $300 from a prior year was determined to be uncollectible and was written off.
b.
On December 15, the customer balance for $300 written off on August 31 was collected in full.
Record the reversal of the write-off of the $300 customer account.

Following is the April 30 Accounts Receivable Subsidiary Ledgerof Gabbard, Inc., a retailer of tents and camping equipment. (Theledger is also available for download at the end of theprompt.)

Accounts Receivable Subsidiary Ledger
Gabbard, Inc.
April 30, 20xx Open Receivables

Customer:

Acme Sporting Goods Central
4726 Interstate Highway 2L
Devron, Kansas 76588
507‐945‐8800

Account 43985
Credit Terms: 30 days
Credit Limit: $15,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

77341

April 27

May 27

$1,366.48

75118

April 1

May 1

4,975.00

70698

March 15

April 14

4,017.15

65287

January 14

February 13

659.59

$11,018.22

Customer:

Brufton Outdoors
623 Main Street NW
Devron, Kansas 76588
507‐945‐1844

Account 41772
Credit Terms: 30 days
Credit Limit: $15,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

67915

February 20

March 22

$1,946.40

61190

January 2

February 1

6,763.10

$8,709.50

Customer:

Jafferty Sporting Goods
8466 State Route 33
Elkton, Kansas 76541
507‐312‐9469

Account 30966
Credit Terms: 15 days
Credit Limit: $5,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

74555

March 22

April 6

$4,067.99

$4,067.99

Customer:

Kansas Department of Recreation andSafety
8466 State Route 33
Gray Mountain, Kansas 76529
507‐226‐6881

Account 29667
Credit Terms: 30 days
Credit Limit: $25,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

78021

April 30

May 30

$10,646.20

77216

April 16

May 16

6,653.15

77089

April 15

May 15

975.63

75663

April 1

May 1

299.00

74277

March 15

April 14

1,104.13

73586

March 7

April 6

655.31

67644

February 20

March 22

1,843.83

$22,177.25

Customer:

Pup Scouts of Devron
9064 State Route 16
Devron, Kansas 76588
507‐312‐3126

Account 33117
Credit Terms: 15 days
Credit Limit: $10,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

77911

April 20

May 5

$9,737.91

75559

March 29

April 13

220.04

$9,957.95

Customer:

Regents Athletic Club
22 West Adams Way
Devron, Kansas 76588
507‐945‐2149

Account 30846
Credit Terms: 30 days
Credit Limit: $5,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

66268

January 25

March 24

$2,678.59

61119

January 2

February 1

862.35

$3,540.94

Customer:

Buddy's Sports Buff
212 Oak Street
Silver Horn, Kansas 76557
507‐399‐7761

Account 16200
Credit Terms: 30 days
Credit Limit: $10,000

Invoice Number

Invoice Date

Due Date

Amount

Customer Total

77115

April 15

May 15

$8,046.40

70564

March 15

April 14

1,774.92

$9,821.32

Required:
Use Microsoft Excel to prepare an electronic spreadsheet of anaccounts receivable aging report for Gabbard for April 30. Organizethe spreadsheet with the following column headings:

Customer Name

Total Account Balance

Current Balance

Past Due Balances

1–30 days

31–60 days

Over 60 days

Invoice #

Amount

Invoice #

Amount

Invoice #

Amount

Invoice #

Amount

Be sure to include each individual invoice for each customer,and show column totals for each customer. Also show report totalsfor each column and verify that the report totals cross‐foot andagree with the ending Total Account Balance for all customers.

In addition to completing the spreadsheet, write a brief paperthat explains the following:

What is the primary purpose of an accounts receivable agingreport?

When should outstanding accounts be written off?

What controls are needed in handling aged accounts?

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