Honey Crunch Limited started business in 2018. It is now 2021 and the Board of Directors of Honey Crunch Limited hired Aegis Solutions to recommend how each of the following types of accounting changes or errors should be dealt with. In early 2019, Honey Crunch changed its estimate from 5% to 4% of receivables on the amount of bad debt expense to be charged to operations. Bad debt expense for 2018, if a 4% rate had been used, would have been $8,000. The company adjusted Net Income in 2018 to reflect the change. As an audit assistant for Aegis, provide Honey Crunch with this information. For each issue write a note for the audit file (3-5 sentences) identify the type of accounting change or error, the appropriate accounting treatment, include amounts where applicable and how net income would be impacted if the issue needs correcting
Honey Crunch Limited started business in 2018. It is now 2021 and the Board of
Directors of Honey Crunch Limited hired Aegis Solutions to recommend how
each of the following types of accounting changes or errors should be dealt with.
In early 2019, Honey Crunch changed its estimate from 5% to 4% of receivables on the amount of
operations. Bad debt expense for 2018, if a 4% rate had been used, would
have been $8,000. The company adjusted Net Income in 2018 to reflect
the change.
As an audit assistant for Aegis, provide Honey Crunch with this information. For
each issue write a note for the audit file (3-5 sentences) identify the type of
accounting change or error, the appropriate accounting treatment, include
amounts where applicable and how net income would be impacted if the issue
needs correcting
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