Question

Jordan, Inc., is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2015 financial statements contain the following information (in millions):

	2015			2014
Balance sheets:
Accounts receivable, net	$	3,832		$	3,847
Income statements:
Sales revenue	$	27,328		$	25,346

A note disclosed that the allowance for uncollectible accounts had a balance of $117 million and $104 million at the end of 2015 and 2014, respectively. Bad debt expense for 2015 was $45 million. Assume that all sales are made on a credit basis.

Required:

1. What is the amount of gross (total) accounts receivable due from customers at the end of 2015 and 2014?
2. What is the amount of bad debt write-offs during 2015?
3. Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2015.
4. Analyze changes in net accounts receivable to calculate the amount of cash received from customers during 2015.

Answer 1

			2015	2014
	A	Account receivable, net	$3,832	$3,847
	B	Allowance for uncollectable accounts	$117	$104
	C=A+B	Gross (Total)accounts receivable	$3,949	$3,951
		Bad debt expense	$45
	1	Gross (total) accounts receivable due from customers in 2015	$3,949	million
		Gross (total) accounts receivable due from customers in 2016	$3,951	million
	2	Bad Debt write off in 2015
		Increase in allowance for uncollectable accounts	$13	(117-104)
		Bad Debt expense	$13
		Bad Debt written off in 2015	$32	million	(45-13)
		Journal Entry in 2015
			Debit	Credit
		Bad Debt expense	$45
		Allowance for uncollectable accounts		$45
		Allowance for uncollectable accounts	$32
		Accounts receivable		$32
		Net increase in Allowance for doubtful debt	$13	(45-32)
	3	Amount of cash received from customers in 2015
		ACCOUNTS RECEIVABLE
			Debit	Credit
		Gross accounts receivable in the beginning	$3,951
		Accounts receivable due to credit sales in 2015	$27,328
		Bad debt written off		$32
		Cash Received during 2015		$27,298
		Balance accounts receivable in the end of year	$3,949
		Cash Received during 2015	$27,298	Million
	4	Amount of cash received from customers in 2015
		Accounts receivable , net at the beginning	$3,847
		Credit sales	$27,328
		Total	$31,175
		Accounts receivable , net at the end	($3,832)
		Increase in allowance for doubtful debt	($45)
		Cash Received in 2015	$27,298	Million