FedEx Corporation sells its services for cash and on account. By selling on credit, FedEx cannot expect

Question:

FedEx Corporation sells its services for cash and on account. By selling on credit, FedEx cannot expect to collect $100 \%$ of its accounts receivable. Assume that at May 31, 2020 and 2019, respectively, FedEx reported the following on its balance sheet (adapted and in millions of U.S. dollars): image text in transcribed

During the year ended May 31, 2020, FedEx earned service revenue and collected cash from customers. Assume bad debt expense for the year was $\$ 380$ million and that FedEx wrote off uncollectible receivables.
{Requirements}
1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectibles, and insert the May 31, 2019, balances as given.
2. Journalize the following assumed transactions of FedEx for the year ended May 31, 2020. Explanations are not required.

a. Service revenue on account, $\$ 37,953$ million

b. Collections on account, $\$ 37,314$ million

c. Bad debt expense, $\$ 380$ million

d. Write-offs of uncollectible accounts receivable, $\$ 200$ million

e. Recovered an account receivable, $\$ 2$ million

f. On May 1, FedEx received a two-month, $8 \%, \$ 50$ million note receivable from one of its large customers in exchange for the customer's past due account. FedEx made the proper year-end adjusting entry for the interest on this note.
3. Post your entries to the Accounts Receivable and the Allowance for Uncollectibles T-accounts.
4. Compute the ending balances for the two $\mathrm{T}$-accounts, and compare your balances to the actual May 31, 2020 amounts. They should be the same.
5. Show what FedEx would report on its income statement for the year ended May 31, 2020.
6. Recommend several ways for FedEx to improve cash collections from receivables.