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2. AR Audit - Peach Blossom Cologne Company Allowance for...

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Peach Blossom Cologne Company B-5 Allowance for Bad Debts 1-23-10 12-31-09 SK ====================================================================================== Allowance Provision for for Bad Debts Bad Debts ====================================================================================== Balance at 12-31-08 10485 A 2009 write-offs 14335 Y -3850 2009 provision 8650 Z 8650 Balance per client at 12-31-09 4800 8650 (TB-BS) (TB-IS) Adjusting journal entries: (AJE # 1) (B-1) (1200) Adjusted balance 3600 (2) N 8650 Journal entry to adjust allowance account: (None required - not considered material) (AJE # 2) 106 Allowance for Doubtful Accounts 2906 833 Provisions for Bad Debts 2906 Balance per audit 6506 11556 Provision For Bad Debts Reasonableness Test: EXPECTED AGED UNCOLL. EST AGE AMOUNT PERCENT UNCOLL. 1-30 211200 (B-1) 1.50% 3168 30-60 20380 (B-1) 10.00% 2038 60-90 2600 (B-1) 50.00% 1300 Over 90 0 (1) 100.00% 0 Balance per Analysis 6506 Adjusted Balance 6506 (2) N Difference 0 A Agreed to prior year's working papers. Y All write-offs approved by credit manager. Z Provision appears reasonable and in line with prior years. N Allowance balance per reasonableness test is higher than client balance less than 1% of net income (before adjustments), no adjustment is considered necessary. SK (1) $1200 - $1200 = 0 (B-1) (AJE #1) per books.
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