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 M’s current year net income appears to increase by 10%. But, Corporation M’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. To identify: The stakeholders of Corporation M.

Question

Fairfield Company's payroll costs for the most recent month are summarized here: Item Hourly labor unges Description 920 hours $27 per hour 190 hours for Job 101 340 hours for Job 102 Factory supervision Production engineer Factory Janitorial work Selling, general, and administrative salaries Total payroll costs Required: 390 hours for Job 103 Total Cost $ 5,130 9,180 10,530 $ 24,840 4,350 7,100 1,200 8,800 $ 46,298 1. & 2. Prepare the journal entries for payroll and to apply manufacturing overhead to production. The company applies manufacturing overhead to products at a predetermined rate of $54 per direct labor hour Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list Journal entry worksheet A B Record Fairfield Company's payroll costs to be paid at a later date. Note Enter debits before credits. S.No Date 1 Account Title Debit Credit

Answer 1

Question

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

(b)

To determine

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

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Fairfield Company's payroll costs for the most recent month are summarized here: Item Hourly labor unges Description 920 hours $27 per hour 190 hours for Job 101 340 hours for Job 102 Factory supervision Production engineer Factory Janitorial work Selling, general, and administrative salaries Total payroll costs Required: 390 hours for Job 103 Total Cost $ 5,130 9,180 10,530 $ 24,840 4,350 7,100 1,200 8,800 $ 46,298 1. & 2. Prepare the journal entries for payroll and to apply manufacturing overhead to production. The company applies manufacturing overhead to products at a predetermined rate of $54 per direct labor hour Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list Journal entry worksheet A B Record Fairfield Company's payroll costs to be paid at a later date. Note Enter debits before credits. S.No Date 1 Account Title Debit Credit

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L.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question: Now assume that 5% of the L.L. Bean boots are returned by customers for various reasons. L. Bean has a 100% refund policy for returns, no matter what the reason. What would the journal entry be to accrue L.L. Bean's sales returns for this one pair of boots?

Answer 2

Question

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

(b)

To determine

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

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Answer 3

Question

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

(b)

To determine

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

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Answer 4

Question

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

(b)

To determine

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

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Answer 5

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

(b)

To determine

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

Answer 6

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

Answer 7

Chapter 8, Problem 8.9EYCT

(a)

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 M’s current year net income appears to increase by 10%. But, Corporation M’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.

To identify: The stakeholders of Corporation M.

Answer 8

(b)

To determine

To identify: Whether Corporation M’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 M’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 M’s growth rate in estimating the allowance for doubtful accounts.

Answer 11

(c)

To determine

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

Answer 12

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Ch. 8 - What is the difference between an account...Ch. 8 - What are some common types of receivables other...Ch. 8 - What are the essential features of the allowance...Ch. 8 - Prob. 4Q Ch. 8 - Prob. 5Q Ch. 8 - Prob. 6Q Ch. 8 - Prob. 7Q Ch. 8 - Tawnya Dobbs, the vice president of sales for...Ch. 8 - Prob. 9Q Ch. 8 - Prob. 10Q

Solution Summary: The author explains that the president's request of increasing allowance for doubtful accounts poses an ethical dilemma for the controller.

To identify: Whether Corporation M’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 M’s growth rate in estimating the allowance for doubtful accounts.

Chapter 8 Solutions