What would moria mining report as pre-tax income

Reference no: EM132694652

The December 31, 2019 financial statements for the Moria Mining Co. reveal reported pre-tax income for 2019 and 2018 as well the ending balance reported for accounts receivable and the related allowance for doubtful accounts for those two years (see table below).

2019 2018

Reported Pre-tax Income $25,000 $21,500

Reported Accounts Receivable $92,000 $86,800

Reported Allowance for Doubtful Accounts $4,280 $4,370

Problem 1: Moria Mining follows the GAAP guidance we learned in class. Mr. Gimli is trying to compare the financial statements of Moria Mining Co. to Legolas Co., but Legolas uses ELFN accounting principles. ELFN principles use the direct write-off method for credit losses, which means Legolas records bad debt expense when the company gives up on ever receiving payment from the customer and writes off the receivable. What would Moria Mining report as pre-tax income if it recorded bad debt expense at the time it wrote-off the receivable instead of the methods we studied in class?

Reference no: EM132694652

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