Question

The statement of cash flows reported bad debt expense for 2021 of $5 million. The summary of significant accounting policies included the following notes ($ in millions): Accounts Receivable (in part) The allowance for uncollectible accounts was $7 and $4 at December 31, 2021 and 2020, respectively. All sales are on credit. Inventories Inventories are valued at the lower of cost or market. The cost of the majority of inventories is measured using the last-in, first-out (LIFO) method. Other inventories are measured principally at average cost and consist mostly of foreign inventories and certain raw materials. If the entire inventory had been valued on an average cost basis, inventory would have been higher by $620 and $470 at the end of 2021 and 2020, respectively. During 2021, 2020, and 2019, liquidation of LIFO layers generated income of $6, $7and $25, respectively.

Answer 1

1	Accounts receivable written off	$       2.00	Millions
2	Cash collection	$ 7,495.00	Millions
3	Cost of goods sold	$ 6,450.00	Millions
4a.	Receivable turnover ratio (7600/(732+632)/2)	$       2.79	times
4b.	Inventory turnover ratio (7600/(965+874)/2)	$       2.07	times
4c.	Gross profit ratio ((7600-6600)/7600)	13.16%

Accounts receivable written off
Opening Balance	$            4
Bad debt expense	$            5
Less: Closing Balance	$           -7
Accounts receivable written off	$               2
Opening balance of Account receivable (632+4)	$        636
Credit sales	$      7,600
Closing balance of Account receivable ((732+7))	$       -739
Bad debt written off	$           -2
Cash collection	$      7,495
Opening balance as per LIFO	$        874
Effect of Average cost valuation	$        470
Cost of purchase	$      6,691
Closing balance as per LIFO	$       -965
Effect of Average cost valuation	$       -620
Cost of goods sold	$      6,450
Opening balance as per LIFO	$       -874
cost of goods	$      6,600
Closing balance as per LIFO	$        965
cost of purchase-	$      6,691