Question

Amdahl Corporation manufactures large-scale, high performance computer systems. In a recent annual report, the balance sheet included the following information (dollars in thousands): Current Year Previous Year Current assets: Receivables, net of allowances of $6,542 and $8,240 in the previous year $ 519,944 $ 597,140 In addition, the income statement reported sales revenue of $2,309,755 ($ in thousands) 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 $2,380,065 ($ in thousands). There were no recoveries of accounts receivable previously written off. . Compute the following (dollar amounts in thousands): a. The amount of uncollectibles written off by Amdahl during the current year. b. The amount of bad debt expense that Amdahl would include in its income statement for the current year. c. The approximate percentage that Amdahl used to estimate uncollectibles for the current year, assuming that it uses the income statement approach. 2. Suppose that Amdahl had used the direct write-off method to account for uncollectibles. Compute the following (dollars in thousands): a. The accounts receivable information that would be included in the year-end balance sheet. b. The amount of bad debt expense that Amdahl would include in its income statement for the current year.

Answer 1

1.

a	Receivables Written Off	8,584.00
b	Bad Debts Expenses	6,886.00
c	Approximate percentage	1%

2.

a	Receivable	526,486.00
b	Bad Debts Expenses	8,584.00

Workings:

	Current	previous
Allowances	6,542.00	8,240.00
Receivable(net)	519,944.00	597,140.00
Gross Receivables	526,486.00	605,380.00

Beginning Gross Receivables	605,380.00
Sales	2,309,755.00
Total Receivables	2,915,135.00
Cash Collected	2,380,065.00
To Be Collected	535,070.00
Ending Gross Receivables	526,486.00
Receivables Written Off	8,584.00

Beginning Allowances	8,240.00
Receivables Written Off	8,584.00
Ending Allowances	6,542.00
Bad Debts Expenses	6,886.00

Ending Receivables	526,486.00
Ending Allowances	6,542.00
Approximate percentage	1%

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