Reference no: EM132385602
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 2014Current assets: Receivables, less allowances of $318 in 2015 and
$357 in 2014$5,877 $6,313
In addition, the income statement reported sales revenue of $43,818 ($ 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 $44,737 ($ in millions). There were no recoveries of accounts receivable previously written off.
Required:
1. Compute the following ($ in millions):
The amount of bad debts written off by TLC during 2015.
The amount of bad debt expense that TLC included in its income statement for 2015.
The approximate percentage that TLC used to estimate bad debts for 2015, assuming that it used the income statement approach.
2. Suppose that TLC 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 that TLC would include in its 2015 income statement.
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