Which of the following items should alert the analyst to the potential for manipulation when...
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Accounting
Which of the following items should alert the analyst to the potential for manipulation when analyzing accounts receivable and the allowance for doubtful accounts? Question options: A company lowers its credit standards and also increases the balance in the allowance for doubtful accounts. An analysis of the Valuation and Qualifying Accounts schedule required in the Form K reveals that the amounts recorded for bad debt expense are close in amount to the actual amounts written off each year. Accounts receivable is growing at a large rate and the allowance for doubtful accounts is decreasing. Sales, accounts receivable and the allowance for doubtful accounts are all growing at approximately the same rate.
Which of the following items should alert the analyst to the potential for manipulation when analyzing accounts receivable and the allowance for doubtful accounts?
Question options:
A company lowers its credit standards and also increases the balance in the allowance for doubtful accounts.
An analysis of the Valuation and Qualifying Accounts schedule required in the Form K reveals that the amounts recorded for bad debt expense are close in amount to the actual amounts written off each year.
Accounts receivable is growing at a large rate and the allowance for doubtful accounts is decreasing.
Sales, accounts receivable and the allowance for doubtful accounts are all growing at approximately the same rate.
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