Question

Gemstone Products 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 2016 and 2015 fiscal years included the following ($ in thousands) 2016 2015 Current assets: Receivables, less allowances of $133,270 in 2016 and $88,870 in 2015 $461,700 $441,400 A disclosure note accompanying the financial statements reported the following ($ in thousands) Year Ended 2016 2015 (In thousands) Calculation of account receivables, net: Receivables Less: allowance for doubtful accounts Less: reserve for product returns Trade accounts receivable, net: $ 594,970 $530, 270 (123, 110) (77,810) (10,160) (11,260) $ 461,700 $441,400 Assume that the company reported bad debt expense in 2016 of $192.400 and had products returned for credit totaling $187.210 (sales price). Net sales for 2016 were $5,648.800 ($ in thousands). Required: 1. What is the amount of accounts receivable due from customers at the end of 2016 and 2015? 2. What amount of accounts receivable did Gemstone write off during 2016? 3. What is the amount of Gemstone's gross sales for the 2016 fiscal year? 4. Assuming that all sales are made on a credit basis, what is the amount of cash Gemstone collected from customers during the 2016 fiscal year?

Answer 1

Answer with working notes is given below

Accounts receivable, net end of the year Add: Allowances Accounts Receivable (Gross) 2016 $461,700 $133,270 $594,970 2015 $441,400 $88,870 $530,270 Beginning balance- Allowance for doubtful debts Add: Bad expense during the year $77,810 $192,400 $270,210 -$123,110 $147,100 Less: Closing balance Allowance for doubtful debts Bad debts written off in 2016 3 Net Sales Add: Estimated Sales Returns Gross Sales $5,648,800 $186,310 As per working below $5,835,110 Closing balance - Reserve for product returns Add: Actual returns $10,160 $187,210 $197,370 -$11,060 $186,310 Less: Opening balance - Reserve for product returns Estimated sales returns 4 Cash collected from customers Opening balance Accounts Receivable Add: Credit Sales Gross Less: Bad debts written off Less: Sales returns actual Less: Closing balance Accounts Receivable Cash collected from customer in 2016 $530,270 $5,835, 110 $147,100 -$187,210 -$594,970 $5,436,100