Anfield Corp The $42,000 Should Have Been Written Off in the First

question 61

Essay

Anfield Corp.is analyzing its accounts receivable for purposes of preparing its second- quarter financial report for June 30,2017.For interim reporting,the company uses the percentage-of-sales method to estimate bad debts.During this analysis,Anfield identified an account for $42,000 that should have been written off in the first quarter ended March 31,2017 but was actually written off in May 2017.
The following table provides information relating to Anfield accounts receivables after recording the provision for bad debts for the quarter but prior to the discovery of the $42,000 error:
$$\begin{array} { | l | l | l | } \hline & \text { March } \mathbf { 3 1 } , \mathbf { 2 0 1 7 } & \text { June } \mathbf { 3 0 } , \mathbf { 2 0 1 7 } \\\hline \text { Accounts receivable - gross } & 2,480,000 & \$ 2,560,000 \\\hline \text { Allowance for doubtful accounts } & ( 183,000 ) & ( 195,000 ) \\\hline \text { Accounts receivable-net } & 2,297,000 & \$ 2,365,000 \\\hline \text { Bad debts expense } & \$ 245,000 & \$ 278,000 \\\hline\end{array}$$
The $42,000 should have been written off in the first quarter (Q1),so accounts receivable (A/R)and allowance for doubtful accounts (ADA)were overstated by this amount.However,since the company estimates bad debts using the percentage-of-sales method,the missing write-off did not have an effect on income.
The account was eventually written off in the second quarter (Q2),so the balance sheet is correct by June 30,2017.In summary,no adjusting entry needs to be made.

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Definitions:

Defined Benefit Plans

A type of pension scheme where the benefits that an employee will receive upon retirement are predetermined based on factors like salary history and duration of employment.

Societal Objectives

Goals or aims that benefit society as a whole, often pursued by organizations, governments, or groups seeking to improve quality of life, social welfare, or community development.

Economic

Pertaining to the production, distribution, and consumption of goods and services and the management of money and resources.

Compensation Package

The total combination of salary, benefits, bonuses, and any other forms of remuneration offered to an employee by an employer.