Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains...

Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the company’s accounting manager provides Willie with the following information, before any adjustment. Accounts receivable $ 1,040,000 Estimated percentage uncollectible 9 % Allowance for uncollectible accounts $ 34,000 (credit) Operating income $ 254,000 Willie’s compensation contract states that if the company generates operating income of at least $204,000, he will get a salary bonus early next year. Required: 1.

1. Record the adjusting entry for uncollectible accounts using the accountant’s estimate of 9% of accounts receivable.

2-a. After the adjustment is recorded in Part 1, what is the revised amount of operating income?

2-b. Will Willie get his salary bonus?

3. Willie instructs the accountant to record the adjustment for uncollectible accounts using 6% rather than 9% of accounts receivable. Now will Willie get his salary bonus? Yes or No?

4. By how much would total assets and operating income be misstated using the 6% amount?

Total Assets
Operating Income

Expert Solution

ekkarill92 answered 2 years ago

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