Allowance method It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account. Ethics case: Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years. (a) To identify: The stakeholders of Corporation O.

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Answer 1

Question

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

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Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,654 $ 28,435 April 11,450 $ 28,344 May 11,982 $ 28,583 June 12,700 $ 28,906 July 11,714 $ 28,462 August 11,200 $ 28,231 September 11,994 $ 28,588 October 11,685 $ 28,449 November 11,833 $ 28,516 Management believes that supply cost is a mixed cost that depends on client visits. Use the high-low method to estimate the variable and fixed components of this cost Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are: A. $2.14 per client visit; $28,463 per month. B. $1.03 per client visit; $16,133 per month. C. $0.49 per client visit; $22,686 per month. D. $0.45 per client visit; $23,191 per month.

Answer 2

Question

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

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Answer 3

Question

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

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Answer 4

Question

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

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Answer 5

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

Answer 6

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

Answer 7

Chapter 8, Problem 8.8BYP

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Corporation O’s current year net income appears to increase by 10%. But, Corporation O’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

(a)

To identify: The stakeholders of Corporation O.

Answer 8

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

Answer 9

(b)

To determine

To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

Answer 10

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

Answer 11

(c)

To determine

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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To identify: Whether Corporation O’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

To describe: Whether controller has to concern about Corporation O’s growth rate in estimating the allowance for doubtful accounts.

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