Sale of All Assets

Stanford Financial Accounting and Reporting Jones Company Assets Sales Discussion

Stanford University

Question Description


Discussion Topic: Sale of All Assets

Because of a massive natural disaster, Jones Company, one of your company’s largest clients, suddenly and unexpectedly became bankrupt. The amount due from Jones Company is no longer collectible and represents 30 percent of your total A/R, an amount that is considerably greater than you estimated that you 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 low 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?