Dell Technologies is a leading global end-to-end technology provider, with a portfolio of hardware, software and service solutions. In a recent annual report, the balance sheet included the following information ($ in millions): 2020 2019 Current assets: Receivables, less allowance of $94 in 2020 and $85 in 2019 $ 12,484 $ 12,371 In addition, the income statement reported sales revenue of $92,154 million 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 $91,868 million. There could have been significant recoveries of accounts receivable previously written off. Required: Compute the following ($ in millions): The amount of bad debts written off by Dell during 2020 (Hint: Treat it as a plug in the gross accounts receivable account). The amount of bad debt expense that Dell included in its income statement for 2020 (Hint: Treat it as a plug in the allowance for uncollectible accounts). The approximate percentage that Dell used to estimate bad debts for 2020, assuming that it used the income statement approach. Suppose that Dell had used the direct write-off method to account for bad debts. Compute the following ($ in millions): The accounts receivable information that would be included in the 2020 year-end balance sheet. The amount of bad debt expense that Dell would include in its 2020 income statement.
Dell Technologies is a leading global end-to-end technology provider, with a portfolio of hardware, software and service solutions. In a recent annual report, the balance sheet included the following information ($ in millions): 2020 2019 Current assets: Receivables, less allowance of $94 in 2020 and $85 in 2019 $ 12,484 $ 12,371 In addition, the income statement reported sales revenue of $92,154 million 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 $91,868 million. There could have been significant recoveries of accounts receivable previously written off. Required: Compute the following ($ in millions): The amount of bad debts written off by Dell during 2020 (Hint: Treat it as a plug in the gross accounts receivable account). The amount of bad debt expense that Dell included in its income statement for 2020 (Hint: Treat it as a plug in the allowance for uncollectible accounts). The approximate percentage that Dell used to estimate bad debts for 2020, assuming that it used the income statement approach. Suppose that Dell had used the direct write-off method to account for bad debts. Compute the following ($ in millions): The accounts receivable information that would be included in the 2020 year-end balance sheet. The amount of bad debt expense that Dell would include in its 2020 income statement.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Dell Technologies is a leading global end-to-end technology provider, with a portfolio of hardware, software and service solutions. In a recent annual report, the
| 2020 | 2019 | |
|---|---|---|
| Current assets: | ||
| Receivables, less allowance of $94 in 2020 and $85 in 2019 | $ 12,484 | $ 12,371 |
In addition, the income statement reported sales revenue of $92,154 million for the current year. All sales are made on a credit basis. The statement of
Required:
-
Compute the following ($ in millions):
- The amount of
bad debts written off by Dell during 2020 (Hint: Treat it as a plug in the gross accounts receivable account). - The amount of bad debt expense that Dell included in its income statement for 2020 (Hint: Treat it as a plug in the allowance for uncollectible accounts).
-
The approximate percentage that Dell used to estimate bad debts for 2020, assuming that it used the income statement approach.
- The amount of
-
Suppose that Dell had used the direct write-off method to account for bad debts. Compute the following ($ in millions):
- The accounts receivable information that would be included in the 2020 year-end balance sheet.
- The amount of bad debt expense that Dell would include in its 2020 income statement.
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VIEWStep 2 Working Note #1:- Calculation of accounts written off
VIEWStep 3 Working Note #2:- Calculation of bad debt expense
VIEWStep 4 Working Note #3:- Calculation of bad debt expense percentage
VIEWStep 5 Working Note #4:- Direct write off method
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