Why are you going to recalculate allowance for doubtful debt

Reference no: EM131926891

Problem

National Telecommunication (NT), a provider of telecommunication services to businesses, has been in existence for a few years. All of NT's sales are on credit. This year, NT expects to increase net income from the previous year by 5%. However, this growth may not be sustainable due to new and advanced technology used by competitors in the industry.

The industry average for percentage used for allowance for doubtful debt is between 1% and 3%.
The Chief Executive Officer (CEO) suggests that you (the controller) increase the company's percentage used for allowance for doubtful debt from 1.5% to 3% of accounts receivables. That way, the percentage used for allowance for doubtful debt is still within acceptable industry range. The CEO also argues that with the change, this year's net income will be lower and will show a modest 2% increase from previous year. This revised growth rate will be more in line with expected future growth rate.

Are you going to recalculate the allowance for doubtful debt and revise net income? Why or why not?

Reference no: EM131926891

Questions Cloud

Relay between the brain and spinal cord : What about the brain stem and this is a critical part of the relay between the brain and spinal cord.

Core of the brain and the neurons : If a virus can destroy the core of a computer how could we make an analogy of what drugs and alcohol might do to the core of the brain and the neurons?

Understanding of sensation and perception : Explain the relevancy of the Stroop Effect to the understanding of sensation and perception. Provide one example in real life where the principles

Analysis of the criminogenic regulatory structure : Summarize his analysis of the criminogenic regulatory structure which enabled that participation.

Why are you going to recalculate allowance for doubtful debt : Why are you going to recalculate the allowance for doubtful debt and revise net income? Why or why not?

What is the point estimate and the standard error of mean : What is the point estimate and the standard error of the mean? Explain. Find the 90% confidence interval estimate.

Contrast biological and behaviorist theories : Compare and contrast biological and behaviorist theories by explaining the strengths and limitations of each theory.

What must be the face value and market value : What must be the face value and market value of that zero-coupon bond?

How do dividends impact the value of a share of stock : Are there any instances in which companies should not pay dividends? How do dividends impact the value of a share of stock?

User Account

All Pages