Q1. Suppose you are an auditor who has been tasked with looking into the internal controls at a company. How can you evaluate the company’s internal controls to see if they are sufficient?
Q2. Why do companies use the allowance method to account for bad debts? Describe the diverse methods used to estimate bad debts in an accounting system. Provide examples for each method.
Q3. Consider that you own a business that purchases equipment for 50,000SR. How would you calculate this asset’s depreciation? Use the different methods to depreciate the equipment.
Note: To calculate depreciation, you must provide the salvage value, useful life, and annual units produced.
Q2. Why do companies use the allowance method to account for bad debts? Describe the diverse methods used to estimate bad debts in an accounting system. Provide examples for each method.
Q3. Consider that you own a business that purchases equipment for 50,000SR. How would you calculate this asset’s depreciation? Use the different methods to depreciate the equipment.
Note: To calculate depreciation, you must provide the salvage value, useful life, and annual units produced.
Answer & Explanation
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1. To evaluate a company’s internal controls, you can look at the company’s procedures and policies, as well as how they are implemented. You can also talk to employees to get their feedback on the controls.
2. Companies use the allowance method to account for ba
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Step-by-step explanation
d debts because it is a more accurate way to estimate the amount of bad debts that will occur. The methods used to estimate bad debts in an accounting system include the percentage of sales method, the aging of receivables method, and the direct write-off method.
3. To calculate the depreciation of an asset, you need to know the salvage value, useful life, and annual units produced. The depreciation methods you can use include the straight-line method, the declining-balance method, and the sum-of-the-years’-digits method.