Chapter 8, Problem 13E

Using Financial Statement Disclosures to Infer Write-Offs and Bad Debt Expense and to Calculate the Receivables Turnover Ratio

Microsoft Corporation develops, produces, and markets a wide range of computer software including the Windows operating system. Microsoft reported the following information about Net Sales Revenue and Accounts Receivable (all amounts in millions).

According to its Form 10-K, Microsoft recorded Bad Debt Expense of $150 and did not recover any previously written-off accounts during the year ended June 30, 2016.

Required:

1. 1. What amount of accounts receivable was written off during the year ended June 30, 2016?
2. 2. What was Microsoft’s receivables turnover ratio (to one decimal place) in the current year?
3. 3. Does your answer in requirement 2 suggest the collectibility of Accounts Receivable improved (or deteriorated) in 2016, relative to 2015 when the turnover was 5.0?