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Globo Gym Services' management has been actively pursuing clien fail to pay invoices when they fall due. Based on the experience of Gym Services in the 2021 financial year which ends on December 3 longer an account receivable is outstanding, the more likely the clie never pays the amount due. The longer the account is due, the mor the client closes their gyms and can never pay amounts due to Glol

Globo Gym Services' management has been actively pursuing clien fail to pay invoices when they fall due. Based on the experience of Gym Services in the 2021 financial year which ends on December 3 longer an account receivable is outstanding, the more likely the clie never pays the amount due. The longer the account is due, the mor the client closes their gyms and can never pay amounts due to Glol

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Globo Gym Services' management has been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Globo Gym Services in the 2021 financial year which ends on December 31, the longer an account receivable is outstanding, the more likely the client never pays the amount due. The longer the account is due, the more likely the client closes their gyms and can never pay amounts due to Globo Gym Services. Answer the following:
Transcribed Image Text:Globo Gym Services' management has been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Globo Gym Services in the 2021 financial year which ends on December 31, the longer an account receivable is outstanding, the more likely the client never pays the amount due. The longer the account is due, the more likely the client closes their gyms and can never pay amounts due to Globo Gym Services. Answer the following:
(a) Identify the method and approach that is appropriate to account for bad debts in this case. (b) With reference to three relevant accounting principles, assumptions and/or qualitative characteristics, justify why the method and approach you have identified in part (a) is appropriate. Clearly label each part of your answer related to parts a and b above. In particular for part b, structure your answer as follows for each of the three relevant accounting principles, assumptions and/or qualitative characteristics: Identify accounting principle, assumption or qualitative characteristic. Justify method and approach appropriateness in the context of accounting principle, assumption or qualitative characteristic above..
Transcribed Image Text:(a) Identify the method and approach that is appropriate to account for bad debts in this case. (b) With reference to three relevant accounting principles, assumptions and/or qualitative characteristics, justify why the method and approach you have identified in part (a) is appropriate. Clearly label each part of your answer related to parts a and b above. In particular for part b, structure your answer as follows for each of the three relevant accounting principles, assumptions and/or qualitative characteristics: Identify accounting principle, assumption or qualitative characteristic. Justify method and approach appropriateness in the context of accounting principle, assumption or qualitative characteristic above..
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