EFG, an accrual basis calendar year corporation, reported $742,000 net income before tax on its financial statements prepared in accordance with GAAP. EFG’s records reveal the following information: The allowance for bad debts as of January 1 was $79,000. Write-offs for the year totaled $14,800, and the addition to the allowance for the year was $12,800. The allowance as of December 31 was $77,000. EFG paid a $25,970 fine to the state of Delaware for a violation of state pollution control laws. EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG’s lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $74,200 allowance for contingent legal liability and reporting a $74,200 accrued expense on the income statement. EFG received a $244,860 advanced payment for 10,000 units of invento
EFG, an accrual basis calendar year corporation, reported $742,000 net income before tax on its financial statements prepared in accordance with GAAP. EFG’s records reveal the following information: The allowance for bad debts as of January 1 was $79,000. Write-offs for the year totaled $14,800, and the addition to the allowance for the year was $12,800. The allowance as of December 31 was $77,000. EFG paid a $25,970 fine to the state of Delaware for a violation of state pollution control laws. EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG’s lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $74,200 allowance for contingent legal liability and reporting a $74,200 accrued expense on the income statement. EFG received a $244,860 advanced payment for 10,000 units of invento
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 5BCRQ
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EFG, an accrual basis calendar year corporation, reported $742,000 net income before tax on its financial statements prepared in accordance with GAAP. EFG’s records reveal the following information:
- The allowance for
bad debts as of January 1 was $79,000. Write-offs for the year totaled $14,800, and the addition to the allowance for the year was $12,800. The allowance as of December 31 was $77,000. - EFG paid a $25,970 fine to the state of Delaware for a violation of state pollution control laws.
- EFG was sued by a consumers' group for engaging in false advertising practices. Although EFG’s lawyers are convinced that the suit is frivolous, its independent auditors insisted on establishing a $74,200 allowance for
contingent legal liability and reporting a $74,200 accrued expense on the income statement. - EFG received a $244,860 advanced payment for 10,000 units of inventory on October 20. EFG reported the payment as revenue the following February when the units were shipped.
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