Increasing allowance for doubtful, Ask an Expert

Finance

The following is an excerpt from a conversation between Joy Pauly, the president and owner of Mullion Wholesale Co., and Trevor Conkle, Mullion controller. The conversation took place on January 3, 2008, shortly after Trevor began preparing the financial statements for the year ending December 31, 2007.

Trevor: Joy, I've completed my analysis for the collectability of our accounts receivable. My staff and I estimate that the allowance for doubtful accounts should be somewhere between USD 60,000 and USD 90,000. Right now, the balance of the allowance account is USD 18,000.

Joy: Oh, no! We are already below the estimated earnings projection I gave the bank last year. We used that as a basis for obtaining a USD 300,000 loan. They're going to be upset! Is there any way we can increase the allowance without the adjustment increasing expenses?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M916077

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Please explain how to find the answer using a financial

Please explain how to find the answer using a financial calculator! Purchase price equals 93,500. Six-year loan with no money down and no monthly payments during the first year. After the first year, payment of $1300 per ...

Use the bond-yield-plus-risk-premium method to estimate the

Use the bond-yield-plus-risk-premium method to estimate the cost of equity for Galveston Corp. A US Treasury bond yields 2.4%, the long-term bond for Galveston yields 4.4%, Galveston's beta is 1.2, the market risk premiu ...

Your company has an opportunity to invest in a project that

Your company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $16,000 the first year, $18,000 the second year, $21,000 the third year, $24,000 the fourth year, $28,000 the f ...

Your division is considering two facility investment

Your division is considering two facility investment projects, each of which requires an upfront expenditure of $15 million. You estimated that the investments will produce the following net cash flows: Year Project A Pr ...

Suppose you bought a five-year zero-coupon treasury bond

Suppose you bought a five-year zero-coupon Treasury bond with $ 1000 face value for $800. Answer the following questions: (a) What is the yield to maturity on the bond? (b) Assume the yield to maturity on comparable bond ...

You are an analyst following a large value firm the beta of

You are an analyst following a large "value" firm. The beta of the firm's stock is 1. The firm uses the capital asset pricing model for project valuation: for typical projects the firm uses a cost of equity capital equal ...

A new computer system will require an initial outlay of

A new computer system will require an initial outlay of $15,000, but it will increase the firm's cash flows by $3,000 a year for each of the next 6 years. a. Calculate the NPV and decide if the system is worth installin ...

Your firm spends 5200 every month on printing and mailing

Your firm spends $ 5,200 every month on printing and mailing? costs, sending statements to customers. If the interest rate is 0.52% per? month, what is the present value of eliminating this cost by sending the statements ...

You make 6000 annual deposits into a retirement account

You make $6,000 annual deposits into a retirement account that pays 10.3 percent interest compounded monthly. How large will your account balance be in 35 years?

Xyz stock price and dividend history are as

XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End 2010 $ 122 $ 5 2011 132 $ 5 2012 $ 110 ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert