ACCOUTING PRIN SET LL INCLUSIVE
14th Edition
ISBN: 9781119815327
Author: Weygandt
Publisher: WILEY
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e. Of the following, the most significant risk factor relating to the risk of misstatement arising from fraudulent financial reporting for SSC is that:
Multiple Choice
Company officers serve on the board of directors.
The company must refinance a significant portion of its debt.
The company operates in the Bisbee, Arizona, area.
The company paid no dividend this year.
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The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses
of 1.90% of credit sales in prior periods.
Presented below is the company's forecast of sales and expenses over the next three years.
Year 3
$ 374,000
Year 2
$ 375,000
Unknown
333,000
Unknown
335,750
Unknown
Unknown
Sales Revenue
Bad Debt Expense
Other Expenses
Net Income
Year 1
$ 369,000
Unknown
340,000
Unknown
Required:
a. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.90% of
sales.
b. Assume that the company changes its estimate of uncollectible credit sales to 1.90% in Year 1, 2.90% in Year 2 and 2.40% in Year 3.
Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario.
The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.40% of credit sales in prior periods.
Presented below is the company's forecast of sales and expenses over the next three years.
Year 1
Year 2
Year 3
Sales Revenue
$
377,000
$
383,000
$
382,000
Bad Debt Expense
Unknown
Unknown
Unknown
Other Expenses
330,000
336,000
334,750
Net Income
Unknown
Unknown
Unknown
Required:
Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.40% of sales.
Assume that the company changes its estimate of uncollectible credit sales to 1.40% in Year 1, 2.40% in Year 2 and 1.90% in Year 3. Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario
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