Grant Company has had a record-breaking year in termsof growth in sales and profitability. However, marketresearch indicates that it will experience operating lossesin two of its major businesses next year. The controllerhas proposed that the company record a provision forthese future losses this year, since it can afford to take thecharge and still show good results. Advise the controlleron the appropriateness of this charge.
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Grant Company has had a record-breaking year in terms
of growth in sales and profitability. However,
research
in two of its major businesses next year. The controller
has proposed that the company record a provision for
these future losses this year, since it can afford to take the
charge and still show good results. Advise the controller
on the appropriateness of this charge.
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- Digital Depot Company, which operates a chain of 40 electronics supply stores, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the firm is considering changing to the allowance method. Information is requested as to the effect that an annual provisionof ¼% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts:Company E is a retailer of commercial and residential plumbing products. Steven Owens, the company’s staff accountant, is in the process of making year-end adjusting entries for uncollectible accounts receivable. Recently, the company has experienced an increase in accounts that have become uncollectible. As a result, Owens believes that the company should increase the percentage used for estimating doubtful accounts from 2% to 5% of credit sales. This change will significantly increase bad debt expense, resulting in a drop in earnings for the first time ever for the company. The company president, Thomas Williams, is under considerable pressure to meet the earnings goals for the fiscal year. He suggests to Steven that this is “not the proper time” to change the estimate. He instructs Steven to keep the estimate at 2%. Steven is confident that 2% is way too low, but he follows Thomas' instructions. Evaluate the decision to use the lower percentage to improve earnings. Are Thomas and…Takaful wishes to adjust their rates for next year, they calculate that the expected loss ratio is 0.77, while the data shows that the loss adjustment expenses is 466 and the total premium earning is 1,053. The company's current rates 65. Using the experience rating method what will the new primum be if the credibility factor is 0.32
- Call Systems Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the company is considering changing to the allowance method. Information is requested as to the effect that an annual provision of ½% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Year of Origin of Accounts Receivable Written Off as Uncollectible Year Sales Uncollectible Accounts Written Off 1st 2nd 3rd 4th 1st $1,220,000 $1,100 $1,100 2nd 1,710,000 2,900 1,350 $1,550 3rd 2,830,000 12,300 3,550 2,850…Takaful wishes to adjust their rates for next year, they calculate that the expected loss ratio is 0.72, while the data shows that the loss adjustment expenses is 384 and the toal premium earning is 923. The company's current ratei s 62. Using the experience rating method what will the new primum be if the credibility factor is 0.62Call Systems Company,a telephone service and supply company,hasjust completed its fourth year of operations.The direct write-off method of recording bad debt expense has been used during the entire period . Because of substantial increases in sales volume and the amount of uncollectible accounts,the company is considering changing to the allowance method.Information is r·equested as to the effect that an annual provision of 1% of sales would have had on the amount of bad debt expense reported for each of the past four years.It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts Instructions 1.Assemble the desired data,using the following column headings: 2. Experience during the first four years of operations indicated that the receivables either were collected within two years or had to be written off as uncollectible . Does the estimate of 1% of…
- Give me correct answer with explanation..jBud Lighting Co. is a retailer of commercial and residential lighting products. Gowen Geter, the company’s chief accountant, is in the process of making year-end adjusting entries for uncollectible accounts receivable. In recent years, the company has experienced an increase in accounts that have become uncollectible. As a result, Gowen believes that the company should increase the percentage used for estimating doubtful accounts from 2% to 4% of credit sales. This change will significantly increase bad debt expense, resulting in a drop in earnings for the first time in company history. The company president, Tim Burr, is under considerable pressure to meet earnings goals. He suggests that this is “not the right time” to change the estimate. He instructs Gowen to keep the estimate at 2%. Gowen is confident that 2% is too low, but he follows Tim’s instructions. Evaluate the decision to use the lower percentage to improve earnings. How would raising the percentage change the financial…Compare Two Methods of Accounting for Uncollectible Receivables Call Systems Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the company is considering changing to the allowance method. Information is requested as to the effect that an annual provision of 12% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Year of Origin of Accounts Receivable Written Off as Uncollectible Uncollectible Accounts Year Sales 1st 2nd 3rd 4th Written Off 1st $1,160,000 2nd 1,660,000 $1,050 $1,050 2,800 1,300 $1,500 3rd 2,660,000…
- Use the following information to answer the next two questions: Lewis Company uses the allowance method for recording its expected credit losses. It estimates bad debts at 2% of credit sales, which were $900,000 during the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for Doubtful Accounts had a balance of $12,200 before adjustments. What is the amount of bad debt expense Lewis Company will report on their Income Statement this year? Select one: a. 17,756 b. 3,000 c. 12,200 d. 18,000 e. 2,756The following information is taken from Marsh Marsh Supermarkets Supermarkets annual report: During the first quarter, we made several decisions resulting in a $13 million charge to earnings. A new accounting pronouncement, FAS 121, required the Company to take a $7.5 million charge. FAS 121 dictates how companies are to account for the carrying values of their assets. This rule affects all public and private companies. The magnitude of this charge created a window of opportunity to address several other issues that, in the Company’s best long term interest, needed to be resolved. We amended our defined benefit retirement plan, and took significant reorganization and other special charges. These charges, including FAS 121, totaled almost $13 million. The result was a $7.1 million loss for the quarter and a small net loss for the year. Although these were difficult decisions because of their short term impact, they will have positive implications for years to come. Marsh Supermarkets’…Please solve quesetion a), thanks