Chapter 6, Problem 15E

Inferring Bad Debt Write-Offs and Cash Collections from Customers

Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts in millions).

	Current Year	Prior Year
Accounts receivable, net of allowances of $333 and $375	$14,987	$13,014
Net revenues	69,943	62,484

According to its Form 10-K, Hassell recorded had debt expense of $88 and there were no bad debt recoveries during the current year. (Hint: Refer to the summary of the effects of accounting for bad debts on the Accounts Receivable (Gross) and the Allowance for Doubtful Accounts T-accounts. Use the T-accounts to solve for the missing values.)

Required:

1. 1. What amount of bad debts was written off during the current year?
2. 2. Based on your answer to requirement (I). solve for cash collected from customers for the current year, assuming that all of Microsoft’s sales during the period were on open account.