Case 3 - Memorandum To: Mr. Shannon Subject: Valuing...

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Memorandum To : Mr. Shannon Subject : Valuing Accounts Receivable Date : December 1, 2011 Introduction I recommend that the company report the Retail, Inc. receivables write- down in the 2010 financial statements rather than 2011. The SEC is becoming increasingly concerned with the decreased quality of earnings of some companies due to their timing of transactions to appear more profitable. By waiting until it is most advantageous to report a receivables loss, Dolls Corporation is managing earnings and may risk losing stockholder trust (Kieso, et al., 161). Following with this idea, we should continue to use the percent of receivables method to determine the allowance for doubtful accounts and bad debt expense. Changing our method of valuing receivables simply to seem more profitable would also be considered a form of earnings management. Timing of Retail, Inc. Write-Down While the actual payment from the settlement with Retail, Inc. will not occur until 2011, it is correct to record the write-down of its receivables during
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Case 3 - Memorandum To: Mr. Shannon Subject: Valuing...

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