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Chap 7B.clipular.png


Requirement 1:

Calculate the amount of bad debts written off by TLC during 2015, bad debt expense that TLC would include in its income statement for 2015 and the approximate percentage that TLC used to estimate debts for 2015, assuming that it uses the income statement approach. 


a.Bad debts written off

b.Bad debt expense

c.Approximate percentage


Requirement 2: Suppose that TLC had used the direct write-off method to account for bad debts, calculate the accounts receivable information that would be included in the 2015 year-end balance sheet.

2015 2014

Current assets:

Receivables


Requirement 2B: Suppose that TLC had used the direct write-off method to account for bad debts, calculate the amount of bad debt expense that TLC would include in its 2015 income statement. 


Bad debt expense

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TLC Inc. manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the
following information [$ in millions): 2815 2614
Current assets:
Receivables, less allowances of $114 in 2615 and
$182 in 2914 $ 4,17? $ 4,613 In addition, the income statement reported sales revenue of $26,716 {$ 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 $217373 in millions}.
There were no recoveries of accounts receivable previously written off. Required:
1. Compute the following [$ in millions): a. "he amount of bad debts written off by TLC during 2015.
b. "he amount of bad debt expense that TLC included in its income statement for 2015. 1:. "he approximate percentage that TLC used to estimate bad debts for 2015, assuming that it used the income statement
approach. 2 Suppose that TLC had used the direct write—off method to accourlt for bad debts. Compute the following [$ in millions): a. "he accounts receivable information that would be included in the 2015 year—end balance sheet.
b. "he amount of bad debt expense that TLC would include in its 2015 income statement. 1039

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