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Question 1 a. A furniture maker decreases bad debts expense from 3% to 2% of credit sales due to new information. b.A manufacturer determines that

Question 1

a.A furniture maker decreases bad debts expense from 3% to 2% of credit sales due to new information.

b.A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions. As a result, it decides to set up an allowance for doubtful accounts at 5% of amounts over 90 days.

c.A parking service estimates bad debts to be 10% of the value of parking violations issued. In the current year, it changes to estimating the allowance for bad debts to equal to 20% of accounts 30 to 90 days and 50% of accounts over 90 days. A decision by management not because of new information

d.A shipbuilder changes it revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shipyard. This change results from a change in shipping policy or a change in business operations from FOB destination to FOB shipping point.

e.An electronics retailer has never accrued for warranties or product guarantees. A new consumer protection law comes into effect which changes business operations, giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer.

f.A clothing company that has been operating for 20 years decides (management) to obtain an external audit for the first time to meet the bank's demands. The audit recommends that management report inventories at the lower of cost and net realizable value, whereas the company has previously only tracked and reported inventory figures at cost. You can have two answers here.

Situation Type of Change Treatment Discussion

a.

b.

c.

d.

e.

f.

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