Question

P 7-2 Uncollectible accounts; EMC Corporation .LO7-5 Real World Financials EMC Corporation manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions): 2015 2014 Current assets: Receivables, less allowances of $90 in 2015 and $72 in 2014 $3,977 $4,413 In addition, the income statement reported sales revenue of $24,704 (5 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 $25,737 (S in millions). There were no recoveries of accounts receivable previously written off. Required: 1. Compute the following (S in millions): a. The amount of bad debts written off by EMC during 2015, b. The amount of bad debt expense that EMC included in its income statement for 2015. c. The approximate percentage that EMC used to estimate bad debts for 2015, assuming that it used the income statement approach Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following (S in millions): a. The accounts receivable information that would be included in the 2015 year-end balance sheet. b. The amount of bad debt expense that EMC would include in its 2015 income statement.

Please show all calculations and explain. Thank You!

Answer 1

Refer below images for the above asked questions in a detailed way of solution.
solution: Requirement a) The amount of bad during 2015: * Accounts receivables debts written off by EMC analysis (& in millions): Partiwlers Balance 2014 [$4413 + $ Add Credit Less: cash Sales collections Amount $4485 $ 24704 $(25737) [4067] Less : Balance 2015 [43977 + $90] Accounts receivable written off during 2015 6) The amount of bad debr expense that EMC included in its income Statement for 2015: * analyses (f in millions): Allowance for oncollectible accounts particulars Balance 2014 Less: write-offs (from above) Less: Balance, 2015 Amount 172 $ 615 $[90] $597 Bad debt expense for corrent the year

The bad approximate percentage that EMC debts for 2015, assuming that it used used to estimate the income Statement approach : percentage = Bad debt expense Credit Sales $597 924704 Requirement @ a) included The in accounts receivable the 2015 year-end information balance that would be sheet: * ($in millions) 2014 2015 particolars Corrent assets : Receivables $4485 $4067 b) * The amount of bad debt expense that EMC would include in its 2015 income statement : ( in millions) Bad debt expense would be equal to actual receivables written off $ (615).