UOP ACC 291 Week 1, E8-4, etc.

ACC/291 – Week 1, E8-4, E8-11, BYP8-1, BYP-8-2

E8-4 Wainwright Company
Account Debit Credit
a. Bad Debt Expense 900
Allowance for Doubtful Accounts 900
(to write off Hiller account)
b. Bad Debt Expense 6,700
Allowance for Doubtful Debts 78,000 x 10% – 1,100 6,700
(to adjust account to total estimated uncollectible)
c. Bad Debt Expense
Allowance for Doubtful Accounts 78,000 x 8% + 500 6,740
(to adjust account to total estimated uncollectible) 6,740

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E8-11 FedEx Corporation Financial Statements
a. Receivables Turnover Ratio = Net Credit Sales / Average Net Receivables 7750 3875
35,497 / (3,391 + 4,359) / 2 = 7538 3769
9.16 Times
Avg Collection Period = 356 / Receivables Turnover Ratio
365 / 9.16 =
39.85 Days
b. Is accounts receivable a material component of total current assets?
Yes. It is over 60% of total current assets in 2013.
c. Calculate what percentage accounts receivable (net) is of current assets
2013 = 3.49%
2014 = 5.46%
BYP8-1 Tootsie Roll Industries, Inc
a. Receivables Turnover Ratio = Net Credit Sales / Average Net Receivables
528,369 / (41,895 + 37,394) / 2 =
13.33 Times
Avg Collection Period = 365 / Receivables Turnover Ratio
365 / 13.33 =
27.38 Days
b. No significant credit risk were identified in 2011
c. The company’s collection period is very impressive and it does a good job collection payments. Also, the total number of bad debts has been decreasing.
BYP8-2 The Hershey Company and Tootsie Roll Industries, Inc
a. Receivables Turnover Ratio = Net Credit Sales / Average Net Receivables Receivables Turnover Ratio = Net Credit Sales / Average Net Receivables
6,080,788 / (536,360 + 445,821) / 2 = 528,369 / (41,895 + 37,394) / 2 =
Hershey 12.38 Times Tootsie 13.33 Times
394780
15.4
Avg Collection Period = 365 / Receivables Turnover Ratio Avg Collection Period = 365 / Receivables Turnover Ratio
365 / 12.38 = 365 / 13.33 =
Hershey 29.48 Days Tootsie 27.38 Days
23.7
b. Both companies show impressive receivable turnover and collection period ratios. This is a result of their ability to extend credit and collect payments.

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ACC 291 Week 1, E8-4, E8-11, BYP8-1, BYP-8-2

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