TalkTech Inc. is a manufacturer and wholesaler of cellular communication products. TalkTech Inc s…

TalkTech Inc. is a manufacturer and wholesaler of cellular communication products. TalkTech Inc s customers are retailers who promote TalkTech Inc s products to the general public. TalkTech Inc. has an October 31 year-end. You are conducting a review of TalkTech Inc s year-end accounting records for its 2012 fiscal year and have been provided with the following information. TalkTech Inc. has the following recorded reserves: Account Opening Additions Subtractions Closing Warranty reserve $35,000 $10,000 $17,500 $27,500 Allowance for Doubtful accounts 32,000 7,500 5,000 34,500 TalkTech Inc. provides a 1-year warranty on most of its products. The warranty is for defects in workmanship or component parts. This warranty is provided as part of the purchase price of TalkTech Inc s products. TalkTech Inc. honours its own warranties. The 2012 addition of $10,000 represents a standard percentage of sales made in the 2012 fiscal period. The 2012 subtraction of $17,500 represents an amount actually paid to honour warranties. The addition of $7,500 to the allowance for doubtful accounts is a result of the application of TalkTech Inc s annual year-end aging analysis. In conversation with the controller of TalkTech Inc. you determine that this $7,500 increase in the allowance for doubtful accounts was computed by applying the company s historical collection percentages to the aged accounts receivable balances. Also, during its 2012 fiscal period, TalkTech Inc. wrote o