Question
TLC Inc. manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions): 2015 2014 Current
TLC Inc. 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 $330 in 2015 and $372 in 2014 | $ | 5,977 | $ | 6,413 | |
In addition, the income statement reported sales revenue of $44,824 ($ 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 $45,737 ($ in millions). There were no recoveries of accounts receivable previously written off. Required: 1. Compute the following ($ in millions):
- The net amount of bad debts written off or reinstated by EMC during 2015.
- The amount of bad debt expense or reduction of bad debt expense that EMC included in its income statement for 2015.
2. Suppose that EMC had used the direct write-off method to account for bad debts. Compute the following ($ in millions):
- The accounts receivable information that would be included in the 2015 year-end balance sheet.
- The amount of bad debt expense or reduction of bad debt expense that EMC included in its income statement for 2015.
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