Financial accounting week 6 critical thinking

Aug 1st, 2015
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Accounting
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Question description

Module 6: Critical Thinking

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Critical Thinking Assignment (130 points)

Important! Read First

Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. 


Option #1: Nebraska Bookshop Financial Review

Nebraska bookshop specializes in used, rare, and out-of-print books. The store has a large base of repeat customers who purchase books on 30-day accounts. At 15 days overdue, each customer gets a phone call from Nebraska requesting payment. Nebraska has experienced a high success rate with this collection effort. Nebraska’s CPA is preparing year-end financial statements, and the company has asked him for his estimate of uncollectible accounts. Nebraska has a balance of $65,000 in the accounts receivable account at the end of the year. The CPA has analyzed the company’s uncollectible accounts using an aging of the accounts receivable. He estimates that only 2.5% of his accounts receivable balance will not be collected. The allowance for doubtful accounts has a credit balance of $210 in the trial balance. 

Complete the following:

  1. Prepare the journal entry to record the bad debts expense at year end.
  2. Show the balance sheet presentation of the accounts receivable account.
  3. Determine and specify the amount of bad debts expense that appears on the income statement. Describe how this amount is classified.
  4. Describe the justification, if any, for Nebraska to use the direct write-off method for accounting for uncollectible accounts.
  5. Indicate three or four measures Nebraska can implement to minimize his write-offs and explain why investors would be concerned about write-offs.

Your response should include 2-3 pages of written text in addition to any calculations and solutions you offer to support your thinking. Document formatting and any citations should conform to CSU-Global Guide to Writing and APA Requirements.

Option #2: Financial Statement Research

You have just landed an accounting position with a national telecommunications company. Because this is your first job you are eager to please your co-workers and your supervisor, who works closely with the controller. Your supervisor has just paid you a visit, and she told you that the controller is concerned that profits for the last fiscal year are much less than profits for the preceding five years. The controller has asked that depreciation on a machine purchased at the beginning of last year be recalculated. The machine has a five-year useful life and is depreciated using the straight-line method. The controller has asked that the machine be depreciated over a ten-year useful life. Your supervisor contends that the “depreciation thing” really doesn’t matter because the machine has already been paid for. In addition, your supervisor gives you an adjusting journal entry to correct what she calls “expense transfers.” This entry transfers items originally recorded as repairs and maintenance to capital assets. 

Address the following:

  1. Do you agree with the supervisor regarding the change in the estimated useful life of the machine? Why or why not?
  2. Are you going to recalculate the depreciation and change the entry? Why or why not?
  3. What is the proper accounting treatment for: (a) repairs and maintenance and 
    (b) plant assets?
  4. What is your supervisor trying to accomplish with the suggested “expense transfers” entry? What would be your course of action regarding the suggested entry?

Your response should include 2-3 pages of written text in addition to any calculations and solutions you offer to support your thinking. Document formatting and any citations should conform to CSU-Global Guide to Writing and APA Requirements.

Posted Fri Jun 19, 2015 at 6:13 am


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