Question
As part of your work on the audit of accounts receivable, you are also tasked with evaluating the reasonableness of Black Panthers allowance for doubtful
As part of your work on the audit of accounts receivable, you are also tasked with evaluating the reasonableness of Black Panthers allowance for doubtful accounts of $15,500. Your audit firm has set performance materiality at $20,000. To assist you with your evaluation, the client has provided an aging of accounts receivable schedule and some details about a few specific customer accounts. Using this information, provide your best estimate for the allowance for doubtful accounts and propose an adjusting entry if you think one is needed.
Company policy requires that 10% of accounts between 31 60 days have a reserved established, 20% of accounts between 60 90 days, 60% of accounts 90 120 days, and 95% of accounts over 120 days.
In addition, the client noted that one customer, Grande Enterprises experienced a catastrophic loss and is experiencing cash flow problems. Grande has assured Black Panther they will pay their bills in full. Grandes entire account balance of $21,000 is between 31 60 days outstanding. Additionally, Minaj Holdings has disputed two invoices from its customer account. The first is for $3,555 and is 92 days outstanding. The second is for $8,000 and is only 15 days outstanding. Minaj states that they will not make any payments on either invoice ever. Black Panther believes its in-house collection team will get at payment for both invoices despite its collection department historically only collecting about 45% of outstanding bills.
I AM NOT JUST LOOKING FOR THE ANSWER, I WOULD LIKE SOMEBODY TO PLEASE EXPLAIN THE PROCESS OF HOW THE ANSWER IS DERIVED AS WELL AS ALL NUMBERS AND COMPUTATIONS PLEASE
1 0 -30 $565,836 1 Days Old 31 - 60 | 60 - 90 $181,100 $43.252 90 120 $3.555 > 120 $1.500 BalanceStep by Step Solution
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