TLC Inc. manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included...

TLC Inc. manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions):

Current assets:

Receivables, less allowances of $150 in 2015 and $147 in 2014

2015 $ 4,477 2014 $ 4,913

In addition, the income statement reported sales revenue of $29,734 ($ in millions) for the current year. All sales are made on a credit basis. The statement of cash flows indicates that cash collected from customers during the current year was $30,737 ($ in millions). There were no recoveries of accounts receivable previously written off.

Required: 1. Compute the following ($ in millions):

The amount of bad debts written off by TLC during 2015.

The amount of bad debt expense that TLC included in its income statement for 2015.

The approximate percentage that TLC used to estimate bad debts for 2015, assuming that it used the income statement approach.

2. Suppose that TLC had used the direct write-off method to account for bad debts. Compute the following ($ in millions):

The accounts receivable information that would be included in the 2015 year-end balance sheet.

The amount of bad debt expense that TLC would include in its 2015 income statement.

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Requirement 1

Beginning Receivables	$4,913+$147	$ 5,060
Add: Credit Sale		$ 29,734
Less: Collection		$ (30,737)
		$ 4,057
Ending Receivbales	$4,477+$150	$ 4,627
Accounts Receivable written off	$4,627-$4,057	$ 570

Beginning allowance balance		$ 147
Less: Written off		$ (570)
Less: Ending Balance		$ (150)
Amount of bad debt expense		$ (573)

Approximate percentage	$573/$29,734	1.93%

Requirement 2

Accounts Receivable	$ 4,627
Bad Debt Expense ($150-$147)	$ 3

ekkarill92 answered 1 year ago

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