Bledsoe has developed plans to expand into the wholesale flower market and is in the process of negotiating a bank loan to finance the expansion. The bank is requesting 2018 financial statements prepared on the accrual basis of accounting from Bledsoe. During the course of a review engagement of Bledsoe, your firm, obtained the following information: 1. Amounts due from customers totaled $142,000 at 12/31/2018. During the year the company wrote off $7,400 of receivables that were deemed to be uncollectible. An analysis of the receivables revealed that an estimated 3% of the balance will probably not be collected in 2019. There were no uncollectable receivables estimated at 12/31/2017. 2. Unpaid invoices for flower purchases totaled $20,500 at December 31, 2018. 3. The inventory totaled $76,800 based on a physical count of the goods at December 31, 2018. The inventory was priced at cost, which approximates market value. 4. On May 1, 2018, Bledsoe paid $8,700 to renew its comprehensive insurance coverage for one year. The premium on the previous one-year policy, which expired on April 30, 2018, was $7,800. No adjustment was made in the prior year, Bledsoe had never heard of a prepaid. 5. During 2018, Bledsoe redid the parking lot at their North retail store. Bledsoe paved and fenced in the lot at a cost of $50,000. The improvements were completed on July 2, 2018, and have an estimated useful life of 10 years. Depreciation on furniture and fixtures was $15,000 for 2018. Bledsoe is being sued for $100,000. Bledsoe's attorney believes that an unfavorable outcome is probable and that a reasonable settlement is $65,000. 7. All employees are paid weekly on Friday. The average payroll is $3,000 (6 day work week) per week. Employees were last paid on Friday, December 28th, 2018 for the week ended December 22nd. Although the employees did not work on Christmas Day, Bledsoe pays them for the day. 6. BI Bledsoe has developed plans to expand into the wholesale flower market and is in the process of negotiating a bank loan to finance the expansion. The bank is requesting 2018 financial statements prepared on the accrual basis of accounting from Bledsoe. During the course of a review engagement of Bledsoe, your firm, obtained the following information: 1. Amounts due from customers totaled $142,000 at 12/31/2018. During the year the company wrote off $7,400 of receivables that were deemed to be uncollectible. An analysis of the receivables revealed that an estimated 3% of the balance will probably not be collected in 2019. There were no uncollectable receivables estimated at 12/31/2017. 2. Unpaid invoices for flower purchases totaled $20,500 at December 31, 2018. 3. The inventory totaled $76,800 based on a physical count of the goods at December 31, 2018. The inventory was priced at cost, which approximates market value. 4. On May 1, 2018, Bledsoe paid $8,700 to renew its comprehensive insurance coverage for one year. The premium on the previous one-year policy, which expired on April 30, 2018, was $7,800. No adjustment was made in the prior year, Bledsoe had never heard of a prepaid. 5. During 2018, Bledsoe redid the parking lot at their North retail store. Bledsoe paved and fenced in the lot at a cost of $50,000. The improvements were completed on July 2, 2018, and have an estimated useful life of 10 years. Depreciation on furniture and fixtures was $15,000 for 2018. Bledsoe is being sued for $100,000. Bledsoe's attorney believes that an unfavorable outcome is probable and that a reasonable settlement is $65,000. 7. All employees are paid weekly on Friday. The average payroll is $3,000 (6 day work week) per week. Employees were last paid on Friday, December 28th, 2018 for the week ended December 22nd. Although the employees did not work on Christmas Day, Bledsoe pays them for the day. 6. BI
