Test Bank – Chapter
6 – The Current Asset Classification, Cash, and Accounts Receivable
A company has a significant debit or credit accumulation in the preadjustment balance of
allowance for doubtful accounts over several periods.
What would this indicate?
How can users detect the source of this problem?
AICPA BB: Critical Thinking AICPA FN: Measurement
Preston Bank has $50 million of loans outstanding on December 31 of the current year, in
which it recorded net income of $770,000.
Preston did not provide for any uncollectible
loans because all of its loans are collateralized by real estate. That is, if the loans were to
default, Preston would obtain the title to the real estate for which the loans were made.