4. Scroll to WP 3.C, Allowance for Uncollectible Accounts. a. What type of correspondence would you examine to satisfy yourself as to the accounts receivable write-offs? b. Draft the suggested Audit Adjustment 2. Are you satisfied that the balance in the allowance is adequate after your recommended adjustment? c. Scroll to WP 3, Accounts and Notes ReceivableTrade (lead schedule). Post Reclassification Entry A and Audit Adjustment 2 to the appropriate locations in the lead schedule.

Module V: Accounts Receivable Aging Analysis Richard Derick has asked you to review the accounts receivable aging analysis and the allowance for doubtful accounts and to recommend any audit adjustments or reclassifications you consider necessary. Shelly Ross had prepared the aging analysis and the allowance for doubtful accounts document before being temporarily transferred to the Joplin Mills audit. She should be back early next week, but Derick would like to "wrap up accounts receivable this week. Based on the aging analysis prepared by Ross, you have decided to confirm all large accounts and a sampling of the smaller accounts, using positive confirmations. 1 2 3 Prepared by: Date: Revieved by: Date: :5 VP 3.0 6 7 8 9 Brony's Bikes Allovance for Uncollectible Accounts Deceber 31, 2019 Account 1250 Account 8325 All. for D.A.B.D. Expense 1 2 1/1/09 Balance per ledger -3 1/1-12/31/X9 Monthly provision $800,000 $500,000 $500,000 5 $1,300,000 $500,000 -8 2/31/09 Yrite-offs: Pacific Coast Bike Shops Phar Hor Stores, Inc. Ontario Discount Stores, Inc. Jack's Bike and Training Shops ($325,600) * ($134,600) ($344,750) * ($275, 050) = 0 ONDOOOOOOOOOOOOOOOOOO $220,000 $500,000 $220,000 $500,000 == === === ===== 2 12/31/19 Balance per ledger 3 4 AJE 2 5 6 12/31/29 Audited balance 7 8 -9 Audit Adjustnent 2: 0 -1 8325 Bad Debts Expense -2 1250 Allovance for Doubtful Accounts .3 .5 6 Based on aging analysis and subsequent collections (WP 3.B) 7 and discussions with Hr. Thite, the credit nanager, 1 Explanation of audit legends: 2 3 Exauined correspondence and discussed with credit nanager 4 Confired 5 + A B 1 VP 3 Brony's Bikes Accounts and Notes Receivable-Trade December 31, 2019 Prepared by: Date: Revieved by: Date: 3 . 1 5 5 12/31/2018 Audited Balance 12/31/2019 Per Ledger Audit Adjustuents Reclassifications 12/31/2019 Audited $11,700,000 $1,500,000 $11,920,000 $80,000 $11,920,000 $80.000 3.A 3.B SO $0 7 3 3 Accounts Receivable-Trade 0 Notes Receivable-Trade 1 2 Total 3 Allovance for Doubtful Accounts 4 5 6 6 7 7 8 O $13, 200,000 ($800,000) $12,000,000 ($220,000) $12,000,000 ($220.000) 3.C $12,400,000 $11,780,000 $0 SO ======= ==== === === $11,780,000 === PTB 1 9