Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 1, Problem 1.5BE
To determine
Financial accounting: Financial accounting is the process of recording, summarizing, and reporting all the transactions in the financial statement of the business over a period of time. The financial statement consists of the
To Identify: The accounting concept that is applied if you agree with the given statement and the accounting concept that is violated if you disagree with the given statement.
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Students have asked these similar questions
Problem 5-7 (AICPA Adapted)
From inception of operations, Savvy Company carried no
allowance for doubtful accounts.
Uncollectible receivables were expensed as written off and
recoveries were credited to income as collected.
During the current year, management recognized that the
accounting policy with respect to doubtful accounts was not
correct, and determined that an allowance for doubtful accounts
was necessary.
A policy was established to maintain an allowance for doubtful
accounts based on historical bad debt loss percentage applied
to year-end accounts receivable.
The historical bad debt loss percentage is to be recomputed
each year based on all available past years up to a maximum of
five years.
Accounts
written off
Year
Credit sales
Recoveries
1,500,000
2,200,000
3,000,000
3,300,000
4,000,000
2016
15,000
40,000
50,000
65,000
88,000
2017
2,000
3,000
5,000
10,000
2018
2019
2020
Accounts receivable balances were P1,250,000 and P2,000,000
on January 1, 2020 and December 31, 2020,…
Read the following information to answer questions 2.1 - 2.2.
LA Fashion has credit sales of $6,400,000 for the financial year ending June 30, 2021, and estimates
at the end of the financial year that five per cent of accounts receivable will not be received.
Accounts receivable total $3,100,000. The corporation uses the allowance method to account for
bad debts, based on the percentage of receivables approach.
Answer 7-10
Chapter 1 Solutions
Intermediate Accounting
Ch. 1 - Prob. 1.1QCh. 1 - What is meant by the phrase efficient allocation...Ch. 1 - Identify two important variables to be considered...Ch. 1 - What must a company do in the long run to be able...Ch. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Explain what is meant by: The benefits of...Ch. 1 - Prob. 1.17QCh. 1 - Briefly define the financial accounting elements:...Ch. 1 - Prob. 1.19QCh. 1 - What is the going concern assumption?Ch. 1 - Prob. 1.21QCh. 1 - Prob. 1.22QCh. 1 - What are two advantages to basing the valuation of...Ch. 1 - Describe how revenue recognition relates to...Ch. 1 - What are the four different approaches to...Ch. 1 - In addition to the financial statement elements...Ch. 1 - Briefly describe the inputs that companies should...Ch. 1 - Prob. 1.28QCh. 1 - Prob. 1.29QCh. 1 - Prob. 1.30QCh. 1 - Prob. 1.31QCh. 1 - Prob. 1.32QCh. 1 - Accrual accounting LO12 Cash flows during the...Ch. 1 - Financial statement elements LO17 For each of the...Ch. 1 - Prob. 1.3BECh. 1 - Basic assumptions and principles LO17 through...Ch. 1 - Prob. 1.5BECh. 1 - Prob. 1.6BECh. 1 - Accrual accounting LO12 Listed below are several...Ch. 1 - Accrual accounting LO12 Listed below are several...Ch. 1 - Prob. 1.3ECh. 1 - Prob. 1.4ECh. 1 - Prob. 1.5ECh. 1 - Financial statement elements LO17 For each of the...Ch. 1 - Concepts; terminology; conceptual framework LO17...Ch. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Basic assumptions and principles LO18, LO19...Ch. 1 - Prob. 1.12ECh. 1 - Prob. 1.13ECh. 1 - Prob. 1.14ECh. 1 - Prob. 1.15ECh. 1 - Prob. 1.1BYPCh. 1 - Research Case 12 Accessing SEC information through...Ch. 1 - Prob. 1.3BYPCh. 1 - Prob. 1.4BYPCh. 1 - Ethics Case 18 The auditors responsibility LO14...Ch. 1 - Prob. 1.9BYPCh. 1 - Judgment Case 110 GAAP, comparability, and the...Ch. 1 - Prob. 1.11BYPCh. 1 - Prob. 1.12BYPCh. 1 - Analysis Case 113 Expense recognition LO19...Ch. 1 - Prob. 1.14BYPCh. 1 - Real World Case 115 Elements; disclosures; The...Ch. 1 - Prob. 1.16BYPCh. 1 - Target Case LO19 Target Corporation prepares its...
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- Problem 8 You were engaged by CPA Co. to audit its financial statements for the first time. In examining the books, you found out that certain adjustments had been overlooked at the end of 2019 and 2020. You also discovered that other items had been improperly recorded. These omissions and other failures for each year are summarized below: 12/31/2020 12/31/2019 Salaries payable P780,000 213,000 307,800 P873,600 Interest receivable 259,200 384,000 Prepaid insurance Advances from customers (collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) Machinery (capital expenditures had been recorded as repairs but should have been charged to Machinery; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%) 561,000 470,400 522,000 564,000 Required: Based on the above and the result of your audit, determine the following:…arrow_forwardIdentify one (1) real-life ‘financial reporting accounting fraud’ that occurred post 1990 (i.e. in the last 30 years), in any country, and answer the following questions: a) Discuss what specific accounting regulations were violated?arrow_forwardd. A mistake in the calculatión of al1owance for uncollectible accounts receivable. 5. Which event after the end of reporting period would generally require disclosure? a. Retirement of key management personnel b. Settlement of litigation when the event that gave rise to the litigation occurred in a prior period c. Strike of employees d. Issue of a large amount of ordinary shares 268arrow_forward
- 13 Analyze the following: I – Evidence of 100% collectability of accounts receivable after reporting period but before date of authorization of FS issuance would require adjustment to the A/R balance with assigned allowance for doubtful accounts. II – Assets and liabilities of a disposal group classified as held for sale should be reported in the statement of financial position separately under current assets and current liabilities, respectively. III – Effect of a change in accounting estimate should be accounted for in the period of change and future periods if the change affects both. Given these, we can conclude that: Group of answer choices Statements I and III are not true. Statements II and III are not false. Only statements I and II are true. Only statement II is true.arrow_forwardAccounting 301 - In-class activity 5 - March 18,2023 From inception of operations to December 31, 2025, Peecan Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Peecan's usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $86,000 at January 1, 2025. During 2025, credit sales totaled $6,200,000, interim provisions for doubtful accounts were made at $62,000, $47,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $3,000 (this can be accounted for by debiting Cash and crediting Allowance for Doubtful Accounts). Peecan installed a computer system in November 2025, and an…arrow_forwardA5arrow_forward
- Problem 7-4 (Bad Debt Reporting) From inception of operations to 31 December 2019, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions were recorded based on analysis of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Fortner's usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $130,000 at 1 January 2019. During 2019, credit sales totalled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Fortner installed a computer system in November 2019, and an aging of accounts receivable was prepared for the first time as of 31 December 2019. A summary of the…arrow_forwardCase 3 In connection with the audit of the financial statements of Malapascua Company, the audit manager provided you the instructions to examine the details of the company's accounts receivable. You have extracted the following balances from the trial balance prepared by your client as of December 31, 2021: Accounts receivable Allowance for bad debts - beginning us P1,600,000 43,500 Your audit client provided you the schedule of the accounts receivable subsidiary ledger based on ageing policy: Accounts with debit balances Page |163arrow_forwardAnswer question 4,56arrow_forward
- Question 8 of 18 The category "trade receivables" includes Select the correct response: none of these advances to officers and employees income tax refunds receivable. claims against insurance companies for casualties sustained < Previousarrow_forwardWhat is the error correction (requiring retroactive restatement)?arrow_forward61arrow_forward
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