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What is the nature of an allowance for doubtful accounts? an allowance for sales adjustments

Part 1 a)What is the nature of an allowance for doubtful accounts? An allowance for sales adjustments?b)How much was bad debt expense for the period?c)What impact would the writeoffs of 49 have had on the balance sheet? d)What would bad debt expense have been and what would be the allowance for doubtful accounts, if the aging method were used with the following %’s considered uncollectible: Current: .1%, past due 1-30 days, 10%, past due 31-60 days, 15%, past due 61-90 days, 40% and past due over 91 days, 50%. Part IIThomson Reuters sells information services, including subscriptions that allow access to informational databases. A typical subscription may allow 12-month unlimited access for a flat fee, with additional charges if usage is above a certain level. The annual subscription is paid in advance (ie, at the beginning of the year). When would you expect revenue to be recognized? What would you expect to see on the balance sheet as a result of the subscription transaction? Question 2 Presented below are selected ratios for four firms Required: 1. What impact would the choice of FIFO vs. weighted average have on the current ratio? 2. Which company manages its accounts receivable the most effectively? Explain. What is a good rule of thumb for the relevant ratio? 3. What impact would the choice of straight-line versus declining balance depreciation have on total asset turnover? 4. Why are there significant differences among the current ratios of the firms? 5. Explain why return on assets is lower than return on equity in the ratios above. Use Marriott as an example. 6. Explain the profitability ratio. Use Washington Post as an example. Question 3 An extract from CAE’s financial statements: a)What is the nature of retained earnings? That is, what does the $1,430.4 closing balance represent? b)How much were dividends for the period? Why is this not an expense on the income statement? c)What is the nature of the CS account? That is, what does the $649.6 closing balance mean? d)Explain the nature of the transaction “repurchase and cancellation of common shares”. That is, what did the company do? How much money, if any, did the company pay?

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