Ender Receivable Case

Since the business does not have enough funds to continue paying its long-term financial obligations, as repayment of debt Angela has decided to exchange Wheeler’s accounts receivable for an $80,000 corporate note payable by the corporation. The remaining assets will be distributed to Angela and she will assume personal liability for the other accounts payable. Furthermore, Wheeler will distribute the real property to Angela who will assume personal liability for the repayment of the mortgage.

E. Why does the auditor not use the same tolerable misstatement or percentage of account balance for all financial statement accounts?

What services do you offer? Will I have a formal written agreement or contract with you? What if I can 't afford to pay your fees or make contributions? In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?

Also, it appears that the distributors are not obliged to pay until they have sold the inventory with a 5months repayment scheme. This contradicts FASB revenue recognition guideline of where obligation to pay should not be contingent on resale of the product.

Since the business does not have enough funds to continue paying its long-term financial obligations, as repayment of debt Angela has decided to exchange Wheeler’s accounts receivable for an $80,000 corporate note payable by the corporation. The remaining assets will be distributed to Angela and she will assume personal liability for the other accounts payable. Furthermore, Wheeler will distribute the real property to Angela, who will assume personal liability for the

Question 3: Describe and show the journal entries illustrating how the company accounts for the transfer of its accounts receivable to financial institutions. Is this accounting treatment reasonable? What are the key assumptions made under this approach? Do you agree with these assumptions?

For example the extra charge for maintenance accumulated from last year and for this year should be equally divided and not charged to the first quarter only. Similarly, cost of relocating the Southern Paper Sioux Springs office that has been charged to the first quarter, had been the expenditure incurred last year. It should not have been included in the first quarter. No doubt these are good accounting practices but nevertheless reverting the charges to their respective results would not compromise GAAP practice. Unrealized income would be better off transferred to the next or the last quarter as the income received would not materialize until at the end of the year. Including the dividend from the company's Brazilian unit would not help increase profitability at the end of the year unless the company is assured of its profitability. As of now it needs to balance its accounts before it can estimate correct profit level at the end of the year. With regard to the obsolete inventories, there is no alternative course of action but to write-off from this

Management must make estimates about uncollected receivables when analyzing the adequacy of the company’s allowance for doubtful accounts. This is done by evaluating the business’ account receivables, customer concentrations, historical debts, customer creditworthiness, current economic trends, and changes in its

From here, she confirms that the appraisal was not completed and summarizing the deposit agreement he will receive the refund minus the costs of the credit report.

There are much more reasons that Judy should not prepare the financial statements for Mark’s store compare to accept the offer. From the Marks stand point, asking Judy for preparing financial statements is easily accessible and reliable because of their friendship. However, he has a risk to disclose all of his personal business information, such as income and profit to his friend. Judy will also feel uncomfortable about her works. Promise keeping is one of important ethics that accountant should have in their task. In this case, Judy is not considered as truly third party accountant because her works may be have her personal perspectives about the friend. Judy is strongly required to evaluate and analyze Mark’s store equally as ordinary client.

As per the Utilitarian approach, I identified the two courses of action available to us. As per the first course of action i.e. insisting upon employing the inventory impairment adjustments in the financial statements, the employees and the members of the management team will be affected. The act could lead to employee layoffs and so it does not align with the welfare of employees and their families. Also, this would lead to reduction of year-end bonuses for the management. The second course of action i.e. providing the manipulated financial statements without impairment adjustment so as to prevent the loan covenant violation would affect the bank (creditor), the CPA firm’s reputation and the stockholders of the company. Such misleading financial statements can even lead to much larger losses to the employees in the event of bankruptcy. This reasoning approach made me chose the option of employing inventory impairment adjustments. The next approach I considered while analyzing the situation was the Rights approach. As per the Rights approach, First National Bank (including the loan officer and other staff) being the company’s creditor has the right to demand the financial statements that are in compliance with GAAP and truly reflect our company’s financials which help them to determine if our company is in compliance with the debt covenants. Also, the major shareholder of the company (Rodriguez) requires precise company’s financial statements in order to approve the bonuses fairly for the members of management team. This reasoning approach also made me chose the option of employing inventory impairment adjustment. As per the Fairness and Justice approach, I wanted to be fair and did not want to employ favoritism for our company by providing manipulated financial statements to the bank. Even though, the controversial impairment adjustments would directly affect my

1. This case involves a small public traded company named Nebobites, which manufactures dog treats. Jenny O., CPA, is the new Assistant Controller for the Nebobites’ company, and her job is to review and audit the financial statements for the 2012 year. While reviewing the financial statements, Jenny noticed the company’s Allowance for Doubtful Accounts balance seemed significantly higher than in the past. This increase in the Allowance account was due to the Bad Debt Expense estimation being based off 3% of net credit sales instead of the prior years’ estimate of 1.5%. The increase in Bad Debts expense as a result of the increase in estimate materially affected the 2012 earnings.

When prepared the financial statement might be ignore this legal case, but this court case at current reporting period, on the basis of the evidence there is a present obligation, the provision should be recognised when the CCA has present obligation and reliable as per AASB137 para10. Legal proceeding is started seeking charge fine US$17million, this liability arise from legal obligation and settlement can be by court and provision should be recognised (Hamodia 2017). Therefore, this risk will make a material misstatement as contingent

Sometimes, the collection of receivables involves a high level of risk. It usually applies to sales when periodic payments must be made over an extended period of time (e.g. home equipment, industrial equipment). In such case revenue recognition is deferred until the cash is received. And there are two methods to deal with this situation:

To present the liabilities credit risk in the Statement of Comprehensive Income, the Board introduced a two-step approach. The two-step approach is explained clearly in the exposure draft which will not affect profit or loss. In the change of liabilities of fair value will be recorded in the income statement. Thereafter the change in fair value included due to own credit will be taken out and recorded in the Statement of Comprehensive Income. If an entity applies the fair value option for financial liabilities and financial assets, an accounting mismatch could arise in the income statement. This is mentioned in the exposure draft. The Board still needs to deal with the accounting mismatch and has asked for comments in the exposure draft. The change in the liabilities credit risk is reported to be useful by users. This can be useful to users because it allows the entity to be compared with other entities, it can show when an entity is struggling and how risky it is.