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Learned Relative to Ethics and Financial Reporting Questions

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Ethics in Accounting
ACC100
March 11, 2020

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1. Consider what you have learned relative to ethics and financial reporting.
What is the rationale for the calculations/process used to estimate the
$180,000 uncollectible allowance?
The allowance for uncollectible accounts is a contra-asset account that is used to
account for the possible bad debts arising from credit extended to the customers.
The result of reporting this allowance would be to show the accounts receivable at
their true collectible value. Creation of allowance for uncollectible accounts is
consistent with the conservatism accounting principle which states that businesses
must account for all anticipated future losses. The amount of $180000 includes
$45000 of allowance on account of a large account which has been overdue for
more than 120 days. Since it is overdue for a considerable amount of time, the
chances of it remaining uncollectible is high. And therefore it has been properly
accounted taking into account its age and the allowance comes to $180,000
including the uncollectible portion on this account.
2. How do you think the misstatement of funds will impact the income statement
and balance sheet?
The misstatement will lead to fraudulent financial reporting. The misstatement of
funds for $45000 will lead to over reporting of income for the year as the bad debt
expense would be accounted for a lesser amount by $45000.Consequently the
Equity in the balance sheet will be over reported which is not a prudent practice. Also
the net accounts receivable will show at a higher amount hiding the true collectible
worth of these accounts receivable.

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Ethics in Accounting ACC100 March 11, 2020 1. Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance? The allowance for uncollectible accounts is a contra-asset account that is used to account for the possible bad debts arising from credit extended to the customers. The result of reporting this allowance would be to show the accounts receivable at their true collectible value. Creation of allowance for uncollectible accounts is consistent with the conservatism accounting principle which states that businesses must account for all anticipated future losses. The amount of $180000 includes $45000 of allowance on account of a large account which has been overdue for more than 120 days. Since it is overdue for a considerable amount of time, the chances of it remaining uncollectible is high. And therefore it has been properly accounted taking into account its age and the allowance comes to $180,000 including the uncollectible portion on this account. 2. How do you think the misstatement of funds will impact the income statement and balance sheet? The misstatement will lead to fraudulent financial reporting. The misstatement of funds for $45000 will lead to over reporting of income for the year as the bad debt expense would be accounted for a lesser amount by $45000.Consequently the Equity in the balance sheet will be over reported which is not a prudent ...
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