(d) Why does a company that uses LIFO have extra cash? Explain
whether this situation will always exist.
=========================================
ACC 537 Week 2 Textbook Problem P7-4 Bad-Debt
Reporting (Fortner Corporation)
For more course tutorials visit
www.uophelp.com
P7-4 (Bad-Debt Reporting) From inception of operations to
December 31, 2014, Fortner Corporation provided for uncollectible
accounts receivable under the allowance method. Provisions were
made monthly at 2% of credit sales, bad debts written off were
charged to the allowance account; recoveries of bad debts previously
written off were credited to the allowance account, and no year-end
adjustments to the allowance account were made. Fortner’s usual
credit terms are net 30 days. The balance in Allowance for Doubtful
Accounts was $130,000 at January 1, 2014. During 2014, credit sales
totaled $9,000,000, interim provisions for doubtful accounts were
made at 2% of credit sales, $90,000 of bad debts were written off, and
recoveries of accounts previously written off amounted to $15,000.
Fortner installed a computer system in November 2014, and an aging
of accounts receivable was prepared for the first time as of December
31, 2014. A summary of the aging is as follows. Based on the review
of collectability of the account balances in the “prior to 1/1/14” aging
category, additional receivables totaling $60,000 were written off as
of December 31, 2014. The 80% uncollectible estimate applies to the
remaining $90,000 in the category. Effective with the year ended
December 31, 2014, Fortner adopted a different method for estimating