AGUAMAINT, INC. REQUIREMENT 2

You returned to Aguamaint about mid-afternoon on Wednesday, January 7. Jerry Loos had prepared written responses to all of your questions. After getting clarification on a couple of points, you are ready to get to work to complete the necessary adjusting and correcting entries.

REQUIRED:

Use the information provided below to create all adjusting and correcting journal entries needed to assure that Aguamaints financial statements will be in accordance with U.S. GAAP. Documentation for each journal entry should include a detailed explanation and all necessary calculations.

- develop 1 page, double-spaced paper for each issue, must include:

1. State the identified accounting issue
2. Identify the accounting rule(s) that pertain(s) to the issue(s)
3. Explain in your own words the accounting rule(s) and treatment of the issue

the issue: 1) Are all receivables collectible? Do you require an allowance for doubtful accounts?

Collection of the receivables will be no problem. We know all the customers with whom we have a contract and we have reviewed each of the accounts at year-end for any potential problems. Everyone has paid on time thus far.