EMC Corporation manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions): P 7-2 Uncollectible accounts; EMC 2014 2015 Corporation • LO7-5 Current assets: $4,413 $3,977 Receivables, less allowances of $90 in 2015 and $72 in 2014 Real World Financials In addition, the income statement reported sales revenue of $24,704 ($ 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 $25,737 ($ in millions). There were no recoveries of accounts receivable previously written off. Required: 1. Compute the following ($ 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 2. Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following ($ 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.
EMC Corporation manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions): P 7-2 Uncollectible accounts; EMC 2014 2015 Corporation • LO7-5 Current assets: $4,413 $3,977 Receivables, less allowances of $90 in 2015 and $72 in 2014 Real World Financials In addition, the income statement reported sales revenue of $24,704 ($ 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 $25,737 ($ in millions). There were no recoveries of accounts receivable previously written off. Required: 1. Compute the following ($ 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 2. Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following ($ 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:EMC Corporation manufactures large-scale, high-performance computer systems. In a recent annual report, the
balance sheet included the following information ($ in millions):
P 7-2
Uncollectible
accounts; EMC
2014
2015
Corporation
• LO7-5
Current assets:
$4,413
$3,977
Receivables, less allowances of $90 in 2015 and $72 in 2014
Real World Financials
In addition, the income statement reported sales revenue of $24,704 ($ 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 $25,737 ($ in millions). There were no recoveries of accounts receivable previously written off.
Required:
1. Compute the following ($ 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
2. Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following ($
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.
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