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What should the employee do

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Problem 1: Historically, a company has calculated bad debits using an aging of accounts receivable. Near the end of the fiscal year, the company is in a cash crunch and needs to borrow money from the bank, using accounts receivable as collateral. The owner of the company knows that many of the accounts receivable are more than 90 days past due, resulting in the net receivables equal to only 80% of total receivables. The owner asks an employee to change the method of estimating bad debits to a flat 3% of receivables. What should the employee do?

Reference no: EM132779143

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