16 to 30 150,000.00 0.94 9,000.00 – 31 to 45 75,000.00 0.80 15,000.00 – 46 to 60 45,000.00 0.65 15,750.00 – 61 to 75 15,000.00 0.50 7,500.00 – Over 75 15,000.00 – – 15,000.00 Total 51,750.00 15,000.00
a. Appropriate balance for AFDA is $ 51,750.00 (equals to Allowance Amount in the Aging Schedule)
b. Presentation of Accounts Receivable in Balance Sheet: Accounts Receivable 735,000.00 Less: Allowance for Doubtful Accounts 51,750.00 Net, Accounts Receivable 683,250.00
c. Dollar Effect of Bad Debt Expense: AFDA, Beginning Balance 37,500.00 AFDA, Write-Off (15,000.00) AFDA, Movement 29,250.00 AFDA, Ending Balance 51,750.00
Dollar Effect of Bad Debt Expense is $ 29.250.00 (equals to movement amount of AFDA)
Case 5-1: Question 1
Stern Corporation
General Journal
(in USD) Date Account Dr. Cr. 2010 Dec 31 Accounts Receivable 9,965,575.00
Sales
9,965,575.00 31 Cash 9,685,420.00
Accounts Receivable
9,685,420.00 31 Allowance for Doubtful Accounts 26,854.00
Accounts Receivable
26,854.00 31 Accounts Receivable 4,594.00
Allowance for Doubtful Accounts
4,594.00 31 Cash 2,108.00 Accounts Receivable 2,108.00 31 Cash 1,566.00 Accounts Receivable 1,566.00 31 Bad Debt Expense 29,886.00
Allowance for Doubtful Accounts
29,886.00
Case 5-1: Question 2
(in USD) Account Beginning Balance, 2010 Movement, 2010 Ending Balance, 2010 Cash 671,344.00 9,689,094.00 10,360,438.00 Accounts Receivable 988,257.00 254,221.00 1,242,478.00 Allowance for Doubtful Accounts 29,648.00 7,626.00 37,274.00 Sales – 9,965,575.00 9,965,575.00 Bad Debt Expenses – 29,886.00 29,886.00
The Essay on Accounts Receivable And Acceptable Audit Risk
1. Explain why decisions about acceptable audit risk, inherent risk, the preliminary judgement about materiality, and performance materiality should be made early in the audit during the planning phase. The purpose of assessing risks early is to help auditor plan the audit by deciding which parts of the audit to emphasize and the extent of testing. It helps auditors to understand the nature, ...
a. Accounts Receivable balance as of Dec 31, 2010 is $ 1,242,478.00 b. Allowance for Doubtful Accounts balance as of Dec 31, 2010 is $ 37,274.00
Case 5-1: Question 3
1 Current Ratio
Current Asset = 13,574,107.00 = 9.4915
Current Liabilities
1,430,132.00
Current Asset:
Cash
10,360,438.00
Accounts Receivable
1,242,478.00
Allowance for Doubtful Accounts
(37,274.00)
U.S Treasury Securities
274,060.00
Inventories
1,734,405.00
Total Current Asset
13,574,107.00
2 Acid Test Ratio
Current Monetary Asset = 11,839,702.00 = 8.2787
Current Liabilities
1,430,132.00
Current Monetary Asset:
Cash
10,360,438.00
Accounts Receivable
1,242,478.00
Allowance for Doubtful Accounts
(37,274.00)
U.S Treasury Securities
274,060.00
Total Current Monetary Asset
11,839,702.00
3 Days Receivable
Accounts Receivable = 1,242,478.00 = 45.5071 Days
Sales / 365
27,302.95
