Historically, your company has calculated bad debts using an aging of accounts receivable. Near the end of the fiscal year, the company is in a cash crunch and needs to borrow money from the bank, using accounts receivable as collateral. The owner of the company knows that many of the accounts receivable are more than 90 days past due, resulting in net receivables equal to only 80% of total receivables. You are asked by the owner asks you to change the method of estimating bad debts to a flat 3% of receivables. What should you do?
Historically, your company has calculated bad debts using an aging of accounts receivable. Near the end of the fiscal year, the company is in a cash crunch and needs to borrow money from the bank, using accounts receivable as collateral. The owner of the company knows that many of the accounts receivable are more than 90 days past due, resulting in net receivables equal to only 80% of total receivables. You are asked by the owner asks you to change the method of estimating bad debts to a flat 3% of receivables. What should you do?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Historically, your company has calculated
You are asked by the owner asks you to change the method of estimating bad debts to a flat 3% of receivables. What should you do?
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