You Have Recently Been Hired as the Assistant Controller for Clayton

question 8

Essay

You have recently been hired as the assistant controller for Clayton, Inc., a large, publicly-held manufacturing company. Your immediate superior is the controller who, in turn, is responsible to the chief financial officer. The controller has assigned you the task of preparing the year-end adjusting entry for bad debts. The allowance for uncollectibles accounts has a credit balance of $86,000 before the year-end adjustment. Your analysis indicates that an appropriate balance for the allowance account is $210,000. After showing your analysis to the controller, she tells you to adjust the allowance account to $310,000. Tactfully, you ask the controller for an explanation for the amount and she tells you "We are having a really good year. Let's bump up the allowance."
Required:
Discuss the ethical dilemma you face. Consider your options and responsibilities along with the possible consequences of any action you might take.

Identify the effects of different smoothing constants on time series forecasts and the speed of reaction to changes in data trends.

Conduct a moving average analysis to smooth time series data and identify patterns.

Differentiate between the use and purpose of exponential smoothing and moving averages.

Recognize and correct for the presence of autocorrelation in time series data.

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Definitions:

Net Receivables

This refers to the total money owed to a company by its customers after allowances for returns, bad debts, and other deductions have been made.

Big Box Retailer

A retail store that occupies a large amount of physical space and offers a variety of products to consumers, often part of a chain.

Sunflower Seeds

The seeds of the sunflower plant, used as a food source and for producing oil, known for their nutritional value including healthy fats, protein, fiber, and vitamins.

Lost Sale

A situation where a business misses the opportunity to sell a product or service due to stockouts, mismatched pricing, or other sales process failures.