“RedPack Beer Company” Allowance for Bad Debts – Essay Sample

Based on my analysis of the transcript, I believe that RedPack Beer Company should increase its modesty, specifically the modesty related to Golden Holdings. Per the treatment with Katie Henson, RedPack Beer does non presently maintain a modesty for the outstanding balance of $ 2. 706. 54. Clint Maddox mentioned that RedPack would not allow this receivable spell ungathered and that an aggregation bureau would be used to roll up the balance. This case study gives more information about the company’s case solutions based on the normal agreements with the aggregation bureau RedPack would have 50% of the aggregation they receive from the client. Therefore, to stay consistent with RedPack’s conservative attack, I believe that Golden Holdings modesty should be increased by $ 1,353,47 (half of their current outstanding balance).

In respects to the militias for Distinct Beer and Eagle Beverage. I believe that these two militias are decently valued and should stay at their current sum. These two militias should stay the same because RedPack has already accounted for the full outstanding balance for Eagle Beverage in which they will be publishing a recognition memo for that staying balance. RedPack has already taken conservative stairss to account for Distinct Beer’s outstanding balance by including 50 % of that balance in the modesty. Based on this. Distinct Beer’s modesty should stay unchanged until new fortunes arise that force the modesty to be recalculated.

There is one concern that I have in respects to the coverage of gross and histories receivable. My exclusive concern is the attack that direction takes in describing the company’s gross. It was mentioned that direction maintains a conservative attack in its accounting for histories receivable. therefore it would be ideal to presume that they utilize the same attack for gross acknowledgment. However. hearers should thoroughly inspect RedPack’s gross acknowledgment attack to guarantee that they are not excessively aggressive in their acknowledgment method.

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Based on the information I have gathered. the adjusted modesty sum I have calculated is $ 6. 902. 47. The addition in the modesty sum of $ 1. 353. 47 is due to the added modesty associated with Golden Holdings. The difference in my modesty estimation and the client’s estimation is not material due to the $ 2. 500 threshold established by the audit program.

Due to the fact that the new modesty estimation is under the materiality threshold. there is not seting journal entry required to set management’s estimation of the modesty. Extra processs that could be performed to verify the truth of the allowance for bad debts are found in AU-C 540. AU-C 540 addresses the hearers duty related to accounting estimations including just value estimations and related revelations. Based on the built-in hazard being set at a high degree in concurrence with the moderate control hazard. there is a high likeliness for a possible stuff misstatement to happen. Based on this. extra processs that could be implemented include: Evaluating alternate premises or results based on possible judgement prejudice in the appraisal procedure. Testing the operating effectivity of the controls over how direction made the accounting estimation Test how direction made the estimation and the informations that the estimation was based on. Review the result of accounting estimations include in the anterior period fiscal statements.