Question

McConnell Products, Inc., located in New York City, is one of the world's largest producers of beauty and related products. The company's consolidated balance sheets for the 2015 and 2014 fiscal years included the following ($ in thousands):

	2015			2014
Current assets:
Receivables, less allowances of $23,316 in 2015 and $25,639 in 2014	$	840,010		$	759,700

A disclosure note accompanying the financial statements reported the following ($ in thousands)

	Year Ended
	2015				2014
	(In thousands)
Calculation of account receivables, net:
Receivables	$	863,326			$	785,339
Less: allowance for doubtful accounts		(9,088	)			(9,140	)
Less: reserve for product returns		(14,228	)			(16,499	)
Trade accounts receivable, net:	$	840,010			$	759,700

Assume that the company reported bad debt expense in 2015 of $3,000 and had products returned for credit totaling $3,380 (sales price). Net sales for 2015 were $6,224,800 (all numbers in thousands).

Required:

1. What is the amount of accounts receivable due from customers at the end of 2015 and 2014?
2. What amount of accounts receivable did McConnell write off during 2015?
3. What is the amount of McConnell's gross sales for the 2015 fiscal year?
4. Assuming that all sales are made on a credit basis, what is the amount of cash McConnell collected from customers during the 2015 fiscal year?

Answer 1

SOLUTION

1.

	2015 ($ in millions)	2014 ($ in Millions)
Accounts Receivable (Net)	840,010	759,700
Add: Allowances	23,316	25,639
Accounts Receivable, Gross	863,326	785,339

2.

Particulars	Amount ($)
Allowance for doubtful accounts: Beginning balance	9,140
Add: Bad debt expense	3,000
Less: Closing Balance end of the Year	(9,088)
Bad debts written off in 2015	3,052

3.

Particulars	Amount ($)
Balance, End of the Year	14,228
Add: Actual Returns	3,380
Less: Balance beginning of year	(16,499)
Estimated sales returns	1,109

Gross sales = Net sales + Estimated sales return

= 6,224,800 + 1,109 = 6,225,909

4.

Particulars	Amount ($)
Balance, beginning of year	785,339
Add: Credit Sales	6,225,909
Less: Bad Debts Write offs	(3,052)
Less: Actual Sales Returns	(3,380)
Less: Balance end of year Cash collections	(863,326)
Cash Collected From Customers 2015	6,141,490