Quiz 2

            The Amdahl Corp. manufactures large scale, high performance computer systems. In a recent annual report, the balance sheet included the following information (dollars in thousands):

 

2009                2008

Current assets:

Net Receivables (less allowance of

$5,680 and $7590, respectively)                     $547,264         $573,050

 

The statement of cash flows indicates that total cash collected from customers during the current year was $3,130.065 million. Write-offs for the year were $39.855 million and there was $1.3 million of accounts receivable previously written off collected during the year. This cash collected from previously written off customers is included in the cash collected from customers.

 

a)      Compute the amount of sales reported by Amdahl during 2009

b)      Compute the amount of bad debts expense that Amdahl would include in its income statement for 2009.

c)      Determine the approximate percentage Amdahl used to estimate uncollectibles for 2009 assuming that it uses the percentage of sales method.

d)     Suppose Amdahl used the direct write-off method to account for uncollectibles. Compute the bad debt expense that would be reported by Amdahl in its 2009 income statement.

e)      Suppose Amdahl used the aging method, determine the amount of bad debts Amdahl would report for 2009 if they estimate probability of doubtful accounts to be 1.5% of ending receivables.