Rosita Arenas Company sells office equipment and

supplies to man
Rosita Arenas Company sells office equipment and supplies to many organizations in the city
and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit
customers have taken advantage of the discount by paying within 10 days of the invoice
date.The number of customers taking the full 30 days to pay has increased within the last year.
Current indications are that less than 60% of the customers are now taking the discount. Bad
debts as a percentage of gross credit sales have risen from the 1.5% provided in past years to
about 4% in the current year.The controller has responded to a request for more information on
the deterioration in collections of accounts receivable with the report reproduced
below.Instructions(a) Prepare an accounts receivable aging schedule for Rosita Arenas
Company using the age categories identified in the controller’s report to the finance committee
showing:(1) The amount of accounts receivable outstanding for each age category and in
total.(2) The estimated amount that is uncollectible for each category and in total.(b) Compute
the amount of the year-end adjustment necessary to bring Allowance for Doubtful Accounts to
the balance indicated by the age analysis. Then prepare the necessary journal entry to adjust
the accounting records.(c) In a recessionary environment with tight credit and high interest
rates:(1) Identify steps Rosita Arenas Company might consider to improve the accounts
receivable situation.(2) Then evaluate each step identified in terms of the risks and
costsinvolved.
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Rosita Arenas Company sells office equipment and supplies to man
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