Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can anyone help verify my understanding what is the business decision and what is the financial-reporting decision based on the following statement by CEO? CEO

Can anyone help verify my understanding what is the business decision and what is the financial-reporting decision based on the following statement by CEO?

CEO began, "Despite having reached this year's total revenue target, I'm concerned about the recent downturn in sales. We need to broaden our customer base. However, I don't want to extend credit to just anyone. So, to offset the risk of selling to bad customers, we'll have to find a way to be stricter in screening potential customers and collecting from existing customers. In light of these changes, that 2 percent bad-debt estimate the controller has used in the past is double what we'll need for this year."

My understanding is: based on facts above, business decisions are like: "We need to broaden our customer base", "I don't want to extend credit to just anyone".

However, financial-reporting decision is like: "that 2 percent bad-debt estimate the controller has used in the past is double what we'll need for this year", in other words, this year, the controller should use 1% bad-debt estimate to prepare the financial statements.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting Creating Value in a Dynamic Business Environment

Authors: Ronald Hilton, David Platt

12th edition

1259969517, 1260566390, 978-1260417043

More Books

Students also viewed these Accounting questions

Question

How is ????1 different from ????1?

Answered: 1 week ago