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What is the rationale for the calculations and process

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Question - In this scenario, My analysis indicates that an appropriate estimated balance for the allowance for uncollectible accounts is $180,000. The existing balance in the allowance account prior to any adjusting entry is a $20,000 credit balance.

After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and to create a new invoice to the customer with a revised date that agrees with the new category. This will change the required allowance for uncollectible accounts from $180,000 to $135,000.

1. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?

2. What would the misinterpretation of those funds impact on the balance sheet?

Reference no: EM132437236

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