Question

Minta Corporation is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2017 financial statements contain the following information ($ in millions):

	2017			2016
Balance sheets:
Accounts receivable, net	$	4,667		$	4,231
Income statements:
Sales revenue	$	37,140		$	35,166

A note disclosed that the allowance for uncollectible accounts had a balance of $37 million and $61 million at the end of 2017 and 2016, respectively. Bad debt expense for 2017 was $58 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 2017 and 2016?
2. What is the amount of bad debt write-offs during 2017?
3. Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2017.
4. Analyze changes in net accounts receivable to calculate the amount of cash received from customers during 2017.
  

Answer 1

1) Calculation of Gross Accounts Receivable (Amounts in millions $)

	2017	2016
Accounts receivable, net	4,667	4,231
Add: Allowance for Uncollectible Accounts	37	61
Gross Accounts Receivable	4,704	4,292

Therefore, gross accounts receivable at the end of 2017 and 2016 is $4,704 millions and $4,292 millions respectively.

2) Calculation of bad debt write off during 2017 (Amounts in Millions $)

Beg. Balance in Allowance for Uncollectible Accounts	61
Add: Bad debt expense for 2017	58
Less: Ending Balance in Allowance for Uncollectible Accounts	(37)
Bad debt written off during 2017	82

Therefore bad debt written off during 2017 is $82 millions.

3) Calculation of cash received during 2017 from gross accounts receivable (Amounts in Millions $)

Gross Accounts receivable at the end of 2016	4,292
Add: Credit Sales during 2017	37,140
Less: Bad debt written off during 2017	(82)
Less: Gross Accounts receivable at the end of 2017	(4,704)
Cash Received from Customers during 2017	36,646

Therefore cash received from customers during 2017 is $36,646 millions

4) Calculation of cash received during 2017 from net accounts receivable (Amounts in Millions $)

Net Accounts receivable at the end of 2016	4,231
Add: Credit Sales during 2017	37,140
Less: Bad debt written off during 2017	(82)
Add: Decrease in Allowance for uncollectible accounts (61-37)	24
Less: Net Accounts receivable at the end of 2017	(4,667)
Cash Received from Customers during 2017	36,646

Therefore cash received from customers during 2017 is $36,646 millions