Which of the Following Would Be Accounted for on a Prospective

question 68

Multiple Choice

Which of the following would be accounted for on a prospective basis? (More than one answer may be correct. )

• A)A furniture maker decreases bad debts expense from 3% to 2% of credit sales.
• 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 be equal to 20% of accounts 30 to 90 days and 50% of accounts over 90 days.
• D)A shipbuilder changes its 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 from f.o.b.destination to f.o.b.shipping point.(Recall from introductory accounting that f.o.b.means "free on board," and it refers to the point at which ownership transfers from seller to buyer. )
• E)An electronics retailer has never accrued for warranties or product guarantees.A new consumer protection law comes into effect,giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer.

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Definitions:

Strict-Liability Action

Legal action where the defendant is held liable for damages without the need for proof of negligence or fault.

Defective

Referring to a product or good that is flawed or imperfect, failing to meet the required standards or expectations.

Unreasonably Dangerous

Refers to a condition or aspect of a product that poses a risk of harm to consumers or users beyond what would be expected by the ordinary user.

State-Of-The-Art Defense

A legal defense used in product liability, claiming that a product is safe based on the most advanced technology available at the time of production.