Ch. 8

12) At a recent board of directors meeting of Ascot , Inc., one of the directors expressed concern over the allowance for doubtful accounts appearing on the company's balance sheet. "I don't understand this account," he said. "Why don't we just show accounts receivables at the amount we should receive if we should them to a financial institution and get rid of that allowance account?"

Prepare a written response to the director. Include in your response (1) an explanation of why the company has an allowance account, (2) what the balance sheet presentation of accounts receivable is supposed to show, and (3) how the basic principles of accounting relate to the analysis and presentation of accounts receivable.