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 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):

1. The net amount of bad debts written off or reinstated by EMC during 2015.
2. 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):

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

Answer 1

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