Reference no: EM132811925

Preston Enterprises uses the direct write-off method of accounting for uncollectible accounts. On October 12, a very large account was written off. The amount was subsequently recovered on December 15. Ray Preston, the owner of the company, instructed the accountant to not make a journal entry for the recovery and to hold the check in his desk until after the first of the year "for tax purposes."

Question 1: If you were the accountant, what would you think of Preston's request?

Question 2: If the December 15 entry is not made, how will it affect Preston's current year financial statements?

Question 3: Assume the amount of the charge-off and the subsequent recovery was $10,000. Prepare the proper journal entries for October 12 and December 15.

Question 4: In groups of two or three, discuss the possible consequences for the accountant holding the check in his desk drawer for a couple of weeks.