Question

As its year-end approaches, it appears that Mendez Corporation’s net income will increase by 10% this year. The president of Mendez Corporation, nervous that the stockholders might expect the company to sustain this 10% growth rate in net income in future years, suggests that the controller increases the allowance for doubtful accounts to 4% of receivables in order to lower this year’s net income. The president thinks that the lower net income, which reflects a 6% growth rate, will be a more sustainable rate of growth for Mendez Corporation in future years. The controller of Mendez Corporation believes that the company’s yearly allowance for doubtful accounts should be 2% of receivables.

Does the president’s request pose an ethical dilemma for the controller? Yes or No?

Should the controller be concerned with Mendez Corporation’s growth rate in estimating the allowance? Yes or No?

Also, can you please explain the answer for this question. The part I got wrong.

These transactions took place for Sunland Company 2016 May 1 Received a $2,800, 12-month, 6% note in exchange for an outstanding account receivable from R. Stoney. Dec. 31 Accrued interest revenue on the R. Stoney note. 2017 May 1 Received principal plus interest on the R. Stoney note. (No interest has been accrued since December 31, 2016.) Record the transactions in the general journal. The company does not make entries to accrue interest except at December 31.(Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Debit Credit Date May 1, 2016 Account Titles and Explanation Notes Receivable 2800 Accounts Receivable 2800 Dec. 31, 2016 Interest Receivable BEBE2626262 Interest Revenue ay 1, 2017 Cash 2968 T Notes Receivable 2800 Interest Revenue Interest Receivable

Answer 1

Journal entry

May 1,2017	Cash	2968
	Notes receivable		2800
	Interest revenue		56
	Interest receivable		112