Robertson Company had accounts receivable of $200,000 at December 31, 20X0, and had provided an allowance for

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Robertson Company had accounts receivable of $200,000 at December 31, 20X0, and had provided an allowance for uncollectible accounts of $6,000. After performing all normal auditing procedures relating to the receivables and to the valuation allowance, the independent auditors were satisfied that this asset was fairly stated and that the allowance for uncollectible accounts was adequate. Just before completion of the audit fieldwork late in February, however, the auditors learned that the entire plant of Thompson Corporation, a major customer, had been destroyed by a flood early in February and that as a result Thompson Corporation was hopelessly insolvent. The account receivable from Thompson Corporation in the amount of $44,000 originated on December 28; terms of payment were net 60 days. The receivable had been regarded as entirely collectible at December 31, and the auditors had so considered it in reaching their conclusion as to the adequacy of the allowance for uncollectible accounts. In discussing the news concerning the flood, the controller of Robertson Company emphasized to the auditors that the probable loss of $44,000 should be regarded as a loss of the following year, and not of 20X0, the year under audit.
What action, if any, should the auditors recommend with respect to the receivable from Thompson Corporation?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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