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Your firm is in the process of auditing Penguin Parts, Inc.'s 20X1 financial statements. As part of the audit, the firm has compiled a list of improvements that Penguin Parts should make to be in compliance with U.S. GAAP. You initially drafted the memo of improvements while working on the audit. Now that the audit is approaching completion, you need to review the documentation and revise the memo, correcting any errors.

To revise the document, click on each segment of underlined text below and select the needed correction, if any, from the list provided. If the underlined text is already correct in the context of the document, select [Original Text] from the list. If removal of the underlined text is the best revision to the document, select [Delete Text] from the list if available.

To: Bob Anderson, Manager From: You, Associate Date: 1/15/20X2 Re: Accounting Advisory Service for Penguin Parts, Inc.

Dear Bob:

I examined the bookkeeping system for trade receivable used by Penguin Parts. Even though Penguin Parts is a small firm, it has significant credit loss expense. For reporting in accordance with U.S. GAAP, Penguin Parts should use the allowance method.Answer?

Penguin Parts estimates its allowance for credit losses by aging its accounts receivable as follows:

Age		% Estimated Uncollectible
0-30 days		4%
31-60 days		10%
61-90 days		15%
91-120 days		20%
121+ days		25%

The carrying amount of the accounts receivable is $57,921. Answer?

While I was reviewing the accounts receivable system, Brian informed me that on 1/1/X2 he wrote off the balance of the Polar Exteriors account that was more than 121 days overdue. A payment of $16,590 on that account was received on January 4, 20X2. The allowance for credit losses should be debited for $16,590. Answer?

Based on an analysis of accounts receivable by the internal audit activity of Penguin Parts, collections for 20X1 equaled $440,014.Answer?

Check to see if the answer fits before the answer?

The internal audit activity has prepared an analysis of the possible adoption of the goodwill accounting alternative for the annual reporting period ended December 31, 20X1.

If Penguin Parts appropriately elects the goodwill accounting alternative for 20X1, goodwill cannot be amortized.Answer?