What option the business should choose

Assignment Help Accounting Basics
Reference no: EM13845516

Need to do three sets of Acconting assignment plz make sure it should be different from each other last time I had submitted assignment we got fail in that assignment so tell ur experts to do as per requirements

The Assignment

Harry, Sue and Lee are in partnership and started a new business called "Computer World". Initially they are selling a single notebook item which they purchase from a renowned manufacturer. Although in first year of operations, they were reluctant to extend credit, in their second year of operations they are exploring if the business can extend credit to improve sales. The partners are in dilemma whether the business should follow up the collection itself or make other arrangements. One option is to make sales by extending credit through "Easy Money", a credit union. If a customer makes a purchase through "Easy Money", the business will get immediate cash subject to 4 percent Easy Money's commission to be deducted from the gross amount. The second option is to follow up the sales and collection by the business itself. The third option is to offer a discount of 3.5 percent to customers who will make cash purchases and do not pay by credit card and remainder will obtain credit through Easy Money. The business has following hypothetical figures available for the year:

Projected credit sales $350,000; projected new staff salary if the business wants to follow up the collection $30,000; 30 percent of customers will pay cash.

Requirement 1: What option the business should choose (show your calculation). Are there any other factors that need to be considered while making a credit sales decision?

Requirement 2: If the business decides to follow up the credit by the business itself and appoints a clerk to follow up the collection, is there any issue to consider as part of internal control?

The partners are all aware that simply extending credits by firm itself will lead to some bad debt expenses and they are in dilemma as which accounting method to follow to record the bad debts. All the partners have studied a basic accounting course at a university. Sue argued that the business should follow the ‘Direct Write Off' method as it allows the recording of the ‘Bad Debt' as and when it occurs.

Requirement 3: Do you agree with Sue? Why or why not?

On their discussion about bad debt recording Harry argues that the ‘Allowance Method' is problematic as it requires the making of estimates and estimates are different under different estimation techniques.

Requirement 4: Please provide explanations as how these estimates may not result in any undue bias in accounting record.

On their discussion about bad debt recording Harry further argues that if the business follows the ‘Allowance Method', the business should produce a "Retrospective Statement" to show the difference in estimation of bad debt.

Requirement 5: Please explain whether a "Retrospective Statement" will be required following AASB 108.

Requirement 6: To mediate, Lee argues that the business should be able to use both ‘Direct Write Off' and the "Allowance Method" to record the bad debt. Discuss if it is true.

Verified Expert

Reference no: EM13845516

Calculate abc dividends received deduction for 2013

ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company. JMT pays a $100,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in 2013. Assuming tha

Achieving and maintaining individual excellence

Excellence is measured by an individual's performance. Individuals accomplish goals and experience successes in order to reach excellence. Human service excellence goes beyo

Leased an asset with a fair market value

Probe Manufacturing leased an asset with a fair market value of $145,000 to Detection Devices. Detection will pay Probe $25,000 annually, in advance, for the next 10 years.

Determining the depletion expense

The estimated residual value of the property is $80,000. During 2009, the company extracted and sold 4,000 tons of ore. The depletion expense for 2009 is:

Granfield company has a piece of manufacturing equipment

The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:$17,500 increase$72,400 decrease$14,40

Pension plan at the beginning of current fiscal year

Iota Co. initiated a defined benefit pension plan at the beginning of the current fiscal year. Prior service cost was $240,000, of which $80,000 was amortized, and service c

Describe the business model of the entire entity

Describe the business model of the entire entity. How does the entity receive resources? How does the entity earn a profit? Merely saying that it sells something does not te

Which is not a characteristic of a corporation

Rhubarb Corporation's outstanding stock is 100 shares of $100, 11% cumulative nonparticipating preferred stock and 2,000 shares of $12 par value common stock. Rhubarb paid $

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd