Company E is a retailer of commercial and residential plumbing products. Steven Owens, the company's staff...
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Company E is a retailer of commercial and residential plumbing products. Steven Owens, the company's staff accountant, is in the process of making year-end adjusting entries for uncollectible accounts receivable. Recently, the company has experienced an increase in accounts that have become uncollectible. As a result, Owens believes that the company should increase the percentage used for estimating doubtful accounts from 2% to 5% of credit sales. This change will significantly increase bad debt expense, resulting in a drop in earnings for the first time ever for the company. The company president, Thomas Williams, is under considerable pressure to meet the earnings goals for the fiscal year. He suggests to Steven that this is not the proper time to change the estimate. He instructs Steven to keep the estimate at 29. Steven is confident that 2% is way too low, but he follows Thomas instructions. Instructions: Please answer the following question using a minimum of one hundred fifty words or more in answering the question. After this, please comment on one of your peers answers using at least fifty words or more in your response. Evaluate the decision to use the lower percentage to improve earnings. Are Thomas and Steven acting in an ethical manner? Company E is a retailer of commercial and residential plumbing products. Steven Owens, the company's staff accountant, is in the process of making year-end adjusting entries for uncollectible accounts receivable. Recently, the company has experienced an increase in accounts that have become uncollectible. As a result, Owens believes that the company should increase the percentage used for estimating doubtful accounts from 2% to 5% of credit sales. This change will significantly increase bad debt expense, resulting in a drop in earnings for the first time ever for the company. The company president, Thomas Williams, is under considerable pressure to meet the earnings goals for the fiscal year. He suggests to Steven that this is not the proper time to change the estimate. He instructs Steven to keep the estimate at 29. Steven is confident that 2% is way too low, but he follows Thomas instructions. Instructions: Please answer the following question using a minimum of one hundred fifty words or more in answering the question. After this, please comment on one of your peers answers using at least fifty words or more in your response. Evaluate the decision to use the lower percentage to improve earnings. Are Thomas and Steven acting in an ethical manner?
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An operating expense which was recorded from an accounts receivable which is uncollectible is called ... View the full answer
Related Book For
Corporate Financial Accounting
ISBN: 978-1305653535
14th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
Posted Date:
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