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Because of a massive natural disaster, Jones Company

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Because of a massive natural disaster, Jones Company, one of our company's largest clients, suddenly and unexpectedly became bankrupt. The amount due to us from Jones Company is no longer collectible and represents 30% of our total A/R, an amount that is considerably greater then we estimated we would write off during this accounting period.

The CEO of the company is asking you to not write off all of the A/R this accounting period due to lower levels of net income currently being experienced by the company.

The CEO also feels that the company could receive some cash from the proceeds from the sale of all the assets during the liquidation of Jones Company.

Should you follow the instructions of the CEO?

Why or why not? Provide specific details to support your opinion in your response.

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Solution Preview

I think we should follow the CEOs instructions of NOT writing off all of the 30 % of the Accounts receivables - the two main reasons we can think of are:

A. The Jones' company represents 30 % of the A/R for the company (under consideration) and the accounts ...

Solution Summary

A massive natural disaster for Jones Company are examined.