Although a customer declared bankruptcy in the previous quarter and did not prepay for services, Grass Man lawn service company provided services for the entire 4th Quarter. While Grass Man did not learn of the bankruptcy until the next fiscal year, the assumption that the customer never agreed to pay for the services provided is valid. Assuming that customers request additional services during the prepaid month which generate occasional accounts receivable for Grass Man, the accounting estimate of a 4% allowance is reasonable. In consideration of provided background and assumptions, the question is whether revenue was inappropriately recognized leading to erroneous financial reports or if accounting estimates should be adjusted to reflect
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