As the assistant controller for S Industries you are and are responsible for preparing the year-end...
As the assistant controller for S Industries you are and are responsible for preparing the year-end adjusting entry to estimate uncollectible accounts receivable. The company uses the Allowance Method. For the current year, you have used the historical percentage of 20% of total year-end accounts receivable as a reasonable estimate of amounts that won’t be collected. The controller is concerned about reporting a lower profit for the current year. The controller tells the assistant controller to lower the percentage to 10% this year which would lower the expense resulting in a higher net income. What should you do?
Multiple Choice
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Keep the percentage 20% since this is the most accurate and reasonable estimate for the company’s future uncollectible accounts receivable.
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Changing the percentage does not violate an ethical consideration.
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Lower the percentage to 10% to avoid questions from the company’s investors.
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Lower the percentage to 10% to make sure the controller gives you a good review and raise this year.
Homework Answers
The most appropriate action is as follows:
Keep the percentage 20% since this is the most accurate and reasonable estimate for the company’s future uncollectible accounts receivable.
Explanation:
Changing the percentage and not presenting a true and fair view of the financial statements is unethical.
Add Answer to:
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