cullea1011. 125•5A In an effort to boost sales in the current year, Roy’s Gym has implemented a new program where members do not have to pay for their annual membership until the end of thi year. The program seems to have substantially increased membership and revenues. Below al year-end amounts.
Membership Accounts Revenues Receivable Last year $150,000 $ 6,000 Current year 450,000 170,000.
Arnold, the owner, realizes that many members have not paid their annual membership fee; by the end of the year. However, Arnold believes that no allowance for uncollectible account should be reported in the current year because none of the nonpaying members’ accounts h proven uncollectible. Arnold wants to use the direct write-off method to record bad debts, waiting until the end of next year before writing off any accounts. Required: 1. Do you agree with Arnold’s reasoning for not reporting any allowance for future uncollectible accounts? Explain. . _ tn.,„ in uncollectible accounts of