Concept explainers
a.
Introduction: Allowance for doubtful accounts is a contra asset account which is used to provide provision for losses which may result due to non-receipt of
To describe: Basis for valuation of allowances for doubtful account, its comparison with account balances based on recorded transactions and precision requirement for balances containing estimates.
b.
Introduction: Uncollectible debt represent the debt which is not likely to be realized by the company, depending on the certainty of un-collectability, either an allowance (provision) can be made for the same or the debt can be written off by recognizing it as ‘
To describe:Information that the company may use to make the estimate of the allowance for uncollectible debt.
c.
Introduction: Audit Evidence refers to the evidence obtained by the auditor by performing
To describe: Evidence needed to be collected by auditor in order to determine the fairness of client’s estimate of the allowance for uncollectible accounts.
d.
Introduction: When the allowance is estimated based on past trends, as a percentage of sales, the same rate cannot be taken in the current period since the customer base has been altered and therefore, management would have to determine a new methodology for estimation.
To discuss:Effect of sale to low credit customers on estimate of allowance for doubtful debt.
e.
Introduction: Economic conditions are the prevalent market conditions within which the business operates, a business can only operate profitably when the economic environment within which it exits, allows the business sufficient opportunities.
To describe: Importance of change in economic conditions in estimation of allowance for doubtful accounts.
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Chapter 6 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
- Provide correct answer general Accounting questionarrow_forwardAccounting Cycle Review 15 a-e Carla Vista Corporation's trial balance at December 31, 2020, is presented below. All 2020 transactions have been recorded except for the items described below. Debit Credit Cash Accounts Receivable Inventory $27,400 59,000 22,600 Land 62,900 Buildings 96,900 Equipment 42,000 Allowance for Doubtful Accounts $430 Accumulated Depreciation-Buildings 30,500 Accumulated Depreciation-Equipment 15,000 Accounts Payable 19,300 Interest Payable -0- Dividends Payable Unearned Rent Revenue -0- 8,800 Bonds Payable (10%) 54,000 Common Stock ($10 par) 34,000 Paid-in Capital in Excess of Par-Common Stock 6,800 Preferred Stock ($20 par) -0- Paid-in Capital in Excess of Par-Preferred -0- Stock Retained Earnings 72,970 Treasury Stock -0- Cash Dividends Sales Revenue Rent Revenue Bad Debt Expense Interest Expense Cost of Goods Sold Depreciation Expense Other Operating Expenses Salaries and Wages Expense -0- 576,000 -0- -0- -0- 404,000 -0- 39,900 63,100 Total Unrecorded…arrow_forwardCan you please give me correct answer this general accounting question?arrow_forward
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub