Inferring Bad Debt Write-Offs and Cash Collections from Customers E14-17 Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts in millions). Current Year Prior Year Accounts receivable, net of allowances of $333 and $375 $14,987 $13,014 Net revenues 69,943 62,484 According to its Form 10-K, Microsoft recorded bad debt expense of $14 and there were no bad debt recoveries during the current year. (Hint: Refer to the summary of the effects of accounting for bad debts on the Accounts Receivable (Gross) and the Allowance for Doubtful Accounts T-accounts. Use the T-accounts to solve for the missing values.) Required: What amount of bad debts was written off during the current year? Based on your answer to requirement (1), solve for cash collected from customers for the current year, assuming that all of Microsoft’s sales during the period were on open account.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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Inferring Bad Debt Write-Offs and Cash Collections from Customers |
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Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and
According to its Form 10-K, Microsoft recorded bad debt expense of $14 and there were no bad debt recoveries during the current year. (Hint: Refer to the summary of the effects of accounting for
Required:
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