Chapter 7, Problem 7.2P

Uncollectible accounts; Amdahl

• LO7–5

Real World Financials

Amdahl Corporation manufactures large-scale, high performance computer systems. In a recent annual report, the balance sheet included the following information ($ in thousands):

	Current Year	Previous Year
Current assets:
Receivables, net of allowances of $5,042and $6,590 in the previous year	$504,944	$580,640

In addition, the income statement reported sales revenue of $2,158,755 ($ in thousands) 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 $2,230,065 ($ in thousands). There were no recoveries of accounts receivable previously written off.

Required:

1. 1. Compute the following ($ in thousands):
   1. a. The amount of uncollectibles written off by Amdahl during the current year
   2. b. The amount of bad debt expense that Amdahl would include in its income statement for the current year
   3. c. The approximate percentage that Amdahl used to estimate uncollectibles for the current year, assuming that it uses the income statement approach
2. 2. Suppose that Amdahl had used the direct write-off method to account for uncollectibles. Compute the following ($ in thousands):
   1. a. The accounts receivable information that would be included in the year-end balance sheet
   2. b. The amount of bad debt expense that Amdahl would include in its income statement for the current year