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:

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 December 1, 2009, Amdahl sold $100 million of specific accounts receivable to a factor with recourse. The factor charged a 4% finance fee on the amount of receivables sold and also reserved (withheld) an amount equal to 5% of accounts receivable to cover probable adjustments. Amdahl estimated recourse obligation to be 2% of receivables sold.

 

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.

f)       Prepare the journal entry that would have recorded on December 1, 2009 related to the sale of receivables.

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.