(a) The allowance method of accounting for bad debts requires an estimate of bad debt expense...
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(a) The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period. The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method. Explain the basic differences between the two methods. If you are a CFO of a company, which method would you like to choose to estimate bad debt expenses? What are the advantages and disadvantages of each method? (b) If you are an investor, there are four companies which are different only in their choices of the inventory method ----FIFO, LIFO, weighted average, or specific identification. Which company will you invest in? (c) If you are an auditor, which journal entries will you look more closely --- journal entries booked during the accounting period or adjusting entries at the end of the accounting period? Why? (a) The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period. The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method. Explain the basic differences between the two methods. If you are a CFO of a company, which method would you like to choose to estimate bad debt expenses? What are the advantages and disadvantages of each method? (b) If you are an investor, there are four companies which are different only in their choices of the inventory method ----FIFO, LIFO, weighted average, or specific identification. Which company will you invest in? (c) If you are an auditor, which journal entries will you look more closely --- journal entries booked during the accounting period or adjusting entries at the end of the accounting period? Why?
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Related Book For
Operations management processes and supply chain
ISBN: 978-0136065760
9th edition
Authors: Lee J Krajewski, Larry P Ritzman, Manoj K Malhotra
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