1. Topic: Allowance Account

Jim: This year has been great for business with fantastic customers. This should definitely help our net income and bonuses for the year!

Nancy: Exactly what do you mean, Jim?

Jim: Well, with great customers who should pay their bills, we will not need to establish an allowance for doubtful accounts for our accounts receivable.

Nancy: Wait a minute, Jim. In my accounting classes, we always recorded bad debts expense and the related allowance accounts. Therefore, I believe we need to estimate our bad debts and make an adjusting entry at year-end.

Jim: But with good customers, I don't think it is required to establish an allowance account. Without recording bad debts expense, our net income should increase by $250,000, which definitely helps our year-end bonuses!

Nancy: We need to check whether this is acceptable under GAAP.

Required: Use the FASB Codification to determine whether GAAP requires the establishment of an allowance account for all accounts receivable. What specific Codification references support your conclusion?

2. Topic: Barter Transactions

Jason: I did not realize that our company enters into barter transactions.

Jill: I did not either. But I assume we remove the cost of the asset given up and replace it with the same value for the bartered item received.

Jason: I wonder though, since some of the barter transactions are with foreign entities, how these transactions would be recorded?

Jill: We had better check as to the appropriate accounting.

Required: Utilizing the FASB's Codification, make a report to Jason and Jill as to the appropriate accounting for barter transactions under U.S. GAAP with specific references to the authoritative literature.