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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 the year. The program seems to have substantially increased membership and revenues. Below are year-end amounts. Membership Revenues Accounts 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 fees by the end of the year. However, Arnold believes that no allowance for uncollectible accounts should be reported in the current year because none of the nonpaying members' accounts have proven uncollectible. Arnold wants to use the direct write-off method to record bad debts, waiting until the end of the 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. 2. Suppose that similar programs in the past have resulted in uncollectible accounts of approximately 70%. If Arnold uses the allowance method, what should be the balance of Allowance of Uncollectible Accounts at the end of the current year? 3. Based on your answer in Requirement 2, for what amount will total assets and expenses be misstated in the current year if Arnold uses the direct write-off method? Ignore tax effects.
The Molding Department of Boswell Company has the following production data: beginning work process 30,000 units (60% complete), started into production 510,000 units, completed and transferred out 480,000 units, and ending work in process 60,000 ..
Descriptions of how your organization uses the accounting information for financial management improvement recommendations for you.
What is the difference between the auditor's approach in verifying sales returns and allowances and sales? Why is there a difference?
You are the independent accountant assigned to the audit of Neophyte Company. The company's accountant, a graduate of Rival State University, has prepared financial statements which contained the following questionable items:
Describe the difference between exchange and nonexchange transactions and discuss the rules for recognition of revenues and expenses/expenditures for each type of transaction.
Dustin and Penny are husband and wife and always have lived in Washington. At the time of Dustin's prior death in 2009, he was insured in the amount of $600,000 with Penny as the designated beneficiary.
The company does not manufacture its own skis; it purchases them from a supplier for $158 per pair. How do you find the selling expense?
An auto manufacturer would classify vehicles in various stages of production as:
For each error, indicate (a) whether the trial balance will not balance (b) the amount of the difference and (c) the trial balance column with the larger amount. Consider each error separately. Use the following form, in which error 1 is given as ..
Ten pairs of points yielded a correlation coefficient r of 0.790. If a + 0.05 which of the following statements is correct if H0 : p =0? ( Do not calculate a t-value)
For both companies, as of the end of 2009, the existence of a LIFO reserve demonstrates that LIFO inventory is less than it would have been if FIFO had been used. For both companies, compute the ratio of LIFO inventory/FIFO inventory for 2009 endi..
What is the purpose of internal controls? Be specific.
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