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Clark Pierce conducts a wholesale merchandising business that sells approximately 5,000 items per month with a total monthly average sales value of $250,000. Its annual bad debt rate has been approximately 1½% of sales. In recent discussions with his bookkeeper, Mr. Pierce has become confused by all the alternatives apparently available in handling the Allowance for Doubtful Accounts balance. The following information has been presented to Pierce. 1. An allowance can be set up (a) on the basis of a percentage of sales or (b) on the basis of a valuation of all past due or otherwise questionable accounts receivable. Those considered uncollectible can be charged to such allowance at the close of the accounting period, or specific items can be charged off directly against (1) Gross Sales or to (2) Bad Debt Expense in the year in which they are determined to be uncollectible. 2. Collection agency and legal fees, and so on, incurred in connection with the attempted recovery of bad debts can be charged to (a) Bad Debt Expense, (b) Allowance for Doubtful Accounts, (c) Legal Expense, or (d) Administrative Expense. 3. Debts previously written off in whole or in part but currently recovered can be credited to (a) Other Revenue, (b) Bad Debt Expense, or (c) Allowance for Doubtful Accounts. Instructions Which of the foregoing methods would you recommend to Mr. Pierce in regard to (1) allowances and charge-offs, (2) collection expenses, and (3) recoveries? State briefly and clearly the reasons supporting your recommendations. Assume you are Mr. Pierce's accountant. Write a formal letter explaining your recommendations.
In prior weeks you were asked to report on the following scenarios pertaining to Kobyashi Moru. Remember that each of these scenarios was an independent situation.
colter company prepares monthly cash budgets. relevant data from operating budgets for 2014
George pays $10,000 for a 20% interest in a general partnership which has recourse liabilities of $20,000. The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. George's basis in his ..
At December 31, balances in Overhead are as follows: Lott Company-debit $1,500, Perez Company-credit $900. Prepare the adjusting entry for each company at December 31, assuming the adjustment is made to cost of goods sold.
the following information regarding inventory transactions is available for the month of
Prepare CPA's general journal entry for the cash purchase of CMA's net assets. Do not use implied fair value.
What information does the cash flow statement provide that you cannot see in the other financial statements (income statement, balance sheet, owner's equity)? What elements of the cash flow statement do you think are most important for company..
the cost accountant for blue pharmaceuticals has informed youthat the companys materials quantity variance for the
White Industries started their operations on January 1, year 1 and recorded $400,000 in warranty expense during the year. Warranty expense was the only difference between the company's pretax financial income and its tax return income of $900,000.
Pass the necessary Journal entries and prepare T account of Work-In-Process.
preferred products has the following cost information available for 2009direct materials 4.00 per unitdirect labor 3.00
A financial forecast per professional pronouncements presents to the best of the responsible party's knowledge and belief,
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