74. (p. 550) In January 2015, one of Whale Cove Company's major customers went bankrupt. The customer owed Whale Cove a large account receivable at the year-end, and estimates now indicate that they will likely only collect about one-quarter of the amount owed.How should this event be reflected in Whale Cove's December 31, 2014, financial statements?

Question

74. (p. 550)  In January 2015, one of Whale Cove Company's major customers went bankrupt. The customer owed  Whale Cove a large account receivable at the year-end, and estimates now indicate that they will likely only collect about one-quarter of the amount owed.How should this event be reflected in Whale Cove's December 31, 2014, financial statements?

Quizplus · Accepted Answer

The event provides evidence about conditions that existed at the balance sheet date, indicating that the receivable was impaired as of December 31, 2014. Therefore, it should be accrued in the allowance for doubtful accounts.

74 (P 550) in January 2015, One of Whale Cove