Answered: request to purchase on credit instead…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 12C: Researching GAAP Situation Hamilton Company operates in an industry with numerous competitors. It is...

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Question

The COVID-19 pandemic has affected one of your customers, NEST Ltd adversely. Even though the economies are fast recovering, they have contacted your company to request to purchase on credit instead of cash on delivery. Your boss, Alan, the Marketing Manager has instructed you to review their request. He has asked you to review NEST Ltd’s latest set of financial statements.

(a)In addition, identify other information(other than balance sheet, incomes statement and cash flow statement) that will be helpful in deciding whether to accede to NEST Ltd’s request?

(b)You have also noticed that compared to last year, the allowance for bad debt for Nest Ltd has increased from 2% to 4 % of the accounts receivable. Discuss how this information will impact your review.

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