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):
Note Receivable $ 40,000 $ 20,000
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. On March 1, 2009 Amdahl converted $40 million of accounts receivable owed by
Best Co. to a two year interest bearing note at 12 %. On July 1, Amdahl received
payment on the one year note originally issued on June 30, 2008 at 10% with
interest paid annually. On
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.
the journal entry that would have recorded on
g) Prepare the journal entry on July 1, 2009 for the receipt of payment on the note receivable.
h) Prepare the journal entry associated with the note on December 31, 2009.
i) On March 2010, Amdahl receives $1 million from the factor as refund on the $ 5 million that the factor had retained on the sale of the receivables. Prepare the appropriate journal entry by Amdahl.
j) Independent of (i) assume that the factor had collected $92 million from your list of customers and they do not collect any more receivables. Prepare the appropriate journal entry by Amdahl.