L01, 5 P5-56. Interpreting Accounts Receivable and Related Footnote Disclosure Following is information from the Fitbit Inc. financial statements. Fitbit Inc. (FIT) continued from previous page Customer Bankruptcy In September 2017, Wynit Distribution filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Wynit was the Company's largest customer, historically representing 11% of total revenue during the six months ended July 1, 2017 and 19% of total accounts receivables as of July 1, 2017. In connection with Wynit's bankruptcy filing, the Company believed that the collectability of the product shipments to Wynit during the third quarter of 2017 was not reasonably assured. However, as of July 1, 2017, collectability of accounts receivables from Wynit was reasonably assured. The Company ceased to recognize revenue from Wynit, which totaled $8.1 million during the third quarter of 2017. Additionally, the Company recorded a charge of $35.8 million during the third quarter ended September 30 , 2017 comprised of cost of revenue of $5.5 million associated with shipments to Wynit in the third quarter of 2017 and bad debt expense of $30.3 million associated with all of Wynit's outstanding accounts receivables. Required a. What amount do customers owe Fitbit at each of the year-ends 2016 through 2018 ? b. What percentage of its total accounts receivable does Fitbit deem uncollectible? (Hint: Percentage of uncollectible accounts = Allowance for uncollectible accounts/Gross accounts receivable.) c. What amount of bad debts expense did Fitbit report in its income statement for each of the years 2016 through 2018 ? Is this a significant expense? (Hint: Calculate the common-size expense.) d. Consider the information about Wynit Distribution. How might we adjust our analyses in parts a through c to reflect this information? e. Calculate the average number of days that it took Fitbit to collect its receivables during 2018 and 2017. f. Overall, what is our assessment of the quality of Fitbit's accounts receivable? L01, 5 P5-56. Interpreting Accounts Receivable and Related Footnote Disclosure Following is information from the Fitbit Inc. financial statements. Fitbit Inc. (FIT) continued from previous page Customer Bankruptcy In September 2017, Wynit Distribution filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Wynit was the Company's largest customer, historically representing 11% of total revenue during the six months ended July 1, 2017 and 19% of total accounts receivables as of July 1, 2017. In connection with Wynit's bankruptcy filing, the Company believed that the collectability of the product shipments to Wynit during the third quarter of 2017 was not reasonably assured. However, as of July 1, 2017, collectability of accounts receivables from Wynit was reasonably assured. The Company ceased to recognize revenue from Wynit, which totaled $8.1 million during the third quarter of 2017. Additionally, the Company recorded a charge of $35.8 million during the third quarter ended September 30 , 2017 comprised of cost of revenue of $5.5 million associated with shipments to Wynit in the third quarter of 2017 and bad debt expense of $30.3 million associated with all of Wynit's outstanding accounts receivables. Required a. What amount do customers owe Fitbit at each of the year-ends 2016 through 2018 ? b. What percentage of its total accounts receivable does Fitbit deem uncollectible? (Hint: Percentage of uncollectible accounts = Allowance for uncollectible accounts/Gross accounts receivable.) c. What amount of bad debts expense did Fitbit report in its income statement for each of the years 2016 through 2018 ? Is this a significant expense? (Hint: Calculate the common-size expense.) d. Consider the information about Wynit Distribution. How might we adjust our analyses in parts a through c to reflect this information? e. Calculate the average number of days that it took Fitbit to collect its receivables during 2018 and 2017. f. Overall, what is our assessment of the quality of Fitbit's accounts receivable
