Preston Enterprises uses the direct write-off method of
accounting for uncollectible accounts. On October 12, a very large
account was written off. The amount was subsequently recovered on
December 15. Ray Preston, the owner of the company, instructed the
accountant to not make a journal entry for the recovery and to hold
the check in his desk until after the first of the year “for tax
purposes.”

 1. If you were the accountant, what would you think of
Preston’s request? 2. If the December 15 entry is not made, how
will it affect Preston’s current year financial statements and what
are the possible consequences of holding the check?

Please answer
the questions in full detail.

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