Cash Flows and Bad Debts – Part 1 [WLOs: 1, 2, 3] [CLOs: 1, 2, 5] Prior to begin

Cash Flows and Bad Debts – Part 1
[WLOs: 1, 2, 3] [CLOs: 1, 2, 5]
Prior to beginning work on this assignment, read Case 9-1 and review the Cash Flow Statement Student Input Sheet Download Cash Flow Statement Student Input Sheet. Your cash flow statement should be completed using the Cash Flow Student Input Sheet. Several book numbers have been changed, so use the column on the Cash Flow Statement Student Input Sheet that corresponds to your class start date.
Complete the Cash Flow Statement Student Input Sheet, and then write a five- to seven-page paper completing Case 9-1. Submit both the final paper cash flow input sheet and the final paper using the instructions provided below.
Required:
Solve for the unknowns in the preceding schedule. (Hint: Use T-accounts.)
Make all entries related to the Allowance for credit losses account for 20X0–20X2.
Make all entries for bad debts for 20X0–20X2 assuming that Garrels did not accrue for estimated bad debt losses but instead recorded its bad debt provisions once receivables were determined to be uncollectible. (This is called the direct write-off method.)
Why does GAAP require the allowance method over the direct write-off method?
Calculate the cumulative difference in reported pre-tax income under the allowance and direct write-off methods over the 20X0–20X2 period.
Assume that it is the end of 20X3 and Garrels management is trying to decide on the amount of the bad debt provision for 20X3. Based on an aging of accounts receivable, the accounting department believes that a $400,000 provision is appropriate. However, the company just learned that a customer with an outstanding accounts receivable of $300,000 may have to file for bankruptcy. The decision facing Garrels management is whether to increase the initial provision of $400,000 by $300,000, by some lesser amount, or by nothing at all. What is your recommendation?
Continuing the scenario from requirement 6, now consider the following additional information:
Assume that you are a member of the company’s compensation committee.
Assume further that the company’s chief financial officer (CFO) is solely responsible for deciding the amount of the credit loss expense to record and that the CFO has a cash bonus plan that is a function of reported earnings before income taxes.
Specifically, assume that the CFO receives an annual cash bonus of zero if earnings before income taxes are below $17 million and 10.0% of the amount by which earnings before income taxes exceed $17 million and up to a maximum bonus of $1 million (that is, when net income reaches $27 million, no further bonus is earned).
Your final paper should have the paragraph headings and address the corresponding directives for Case 9-1: Garrels Company: Analyzing Allowances.
In your paper,
What adjustment to the initial $400,000 credit loss expense might the CFO make in each of the following scenarios? Assume that the following earnings before income taxes include the initial $400,000 provision for bad debts.
$11 million
$18.2 million
$38.25 million
$27.15 million
What other scenarios can you identify in which managers might use the provision for bad debts to accomplish some contract-related strategy?
Identify other items in the financial statements (besides the bad debt provision) that managers have the ability to “manage.”
The Cash Flows and Bad Debts final paper
Must be five to seven double-spaced pages in length (not including title, references pages, and final paper input sheet) and formatted according to APA Style (Links to an external site.) as outlined in the Writing Center’s APA Formatting for Microsoft Word (Links to an external site.) resource.
Must include a separate title page with the following:
Title of paper in bold font
Space should appear between the title and the rest of the information on the title page.
Student’s name
Name of institution (University of Arizona Global Campus)
Course name and number
Instructor’s name
Due date
Must utilize academic voice. See the Academic Voice (Links to an external site.) resource for additional guidance.
Must include an introduction and conclusion paragraph. Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
For assistance on writing Introductions & Conclusions (Links to an external site.) as well as Writing a Thesis Statement (Links to an external site.), refer to the Writing Center resources.
Must use at least two credible, scholarly or peer-reviewed sources in addition to the course text.
The Scholarly, Peer-Reviewed, and Other Credible Sources (Links to an external site.) table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
To assist you in completing the research required for this assignment, view The University of Arizona Global Campus Library Quick ‘n’ Dirty (Links to an external site.) tutorial, which introduces the University of Arizona Global Campus Library and the research process, and provides some library search tips.
Must document any information used from sources in APA Style as outlined in the Writing Center’s APA: Citing Within Your Paper (Links to an external site.) guide.
(Links to an external site.)Must include a separate references page that is formatted according to APA Style as outlined in the Writing Center. See the APA: Formatting Your References List (Links to an external site.) resource in the Writing Center for specifications.
Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.

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[WLOs: 1, 2, 3] [CLOs: 1, 2, 5]
Prior to begin appeared first on Assignmentio.