Problem 7-2 (Static) Uncollectible accounts; EMC Corporation [LO7-5]

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

	2015			2014
Current assets:
Receivables, less allowances of $90 in 2015 and $72 in 2014	$	3,977		$	4,413

In addition, the income statement reported sales revenue of $24,704 ($ in millions) 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 $25,737 ($ in millions). There were no recoveries of accounts receivable previously written off. Required: 1. Compute the following ($ in millions):

1. The amount of bad debts written off by EMC during 2015.
2. The amount of bad debt expense that EMC included in its income statement for 2015.
3. The approximate percentage that EMC used to estimate bad debts for 2015, assuming that it used the income statement approach.

2. Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following ($ in millions):

1. The accounts receivable information that would be included in the 2015 year-end balance sheet.
2. The amount of bad debt expense that EMC Corporation would include in its 2015 income statement.

Req1 income statement approach

a. Bad debts written off

b. Bad debt expense

c. approximate perentage

Req 2A direct write-off method

current assets 2015 , 2014

receivables 2015, 2014

Req 2b direct write off method

bad debt expense