P7-5 Receivables; bad debts and returns; Avon Products, Inc. LO7-4, LO7-5 Avon P
ID: 2560002 • Letter: P
Question
P7-5 Receivables; bad debts and returns; Avon Products, Inc. LO7-4, LO7-5
Avon Products, Inc., located in New York City, is one of the world’s largest producers of beauty and related products. The company’s consolidated balance sheets for the 2015 and 2014 fiscal years included the following ($ in thousands):
2015 2014
Current Assets:
Receivables, less allowances of $86,700 in 2015
and $ 106,900 in 2014 $443,000 $515,600
A disclosure note accompanying the financial statements reported the following ($ in thousands):
Year Ended
2015 2014
Calculation of account receivables, net:
Receivables $529,700 $622,500
Less: allowance for doubtful accounts (77,600) (93,700)
Less: reserve for product returns (9,100) (13,200)
Trade accounts receivables, net: $443,000 $515,600
Assume that the company reported bad debt expense in 2015 of $144,100 and had products returned for credit totaling $6,800 (sales price). Net Sales for 2015 were $6,076,500 ($ in thousands).
Required:
What is the amount of accounts receivable due from customers at the end of 2015 and 2014?
What amount of accounts receivables did Avon write-Off during 2015?
What is the amount of Avon’s gross sales for the 2015 fiscal year?
Assuming that all sales are made on a credit basis, what is the amount of cash Avon collected from customers during the 2015 fiscal year?
Explanation / Answer
Accounts receivables Debit Credit 2014 Ending balance 622500 Credit sales 6079200 Cash Collected(Plug-in) 6172000 2015 Ending balance 529700 All. For Acc. Receivables Debit Credit 2014 Ending balance 93700 New provn. 144100 Allowance written-off(Plug-in) 160200 2015 Ending balance 77600 Reserve for product returns Debit Credit 2014 Ending balance 13200 Products returned 6800 New reserve(Plug-in) 2700 2015 Ending balance 9100 1. Amount of accounts receivable due from customers at the end of 2015 2014 Gross 529700 622500 Net(of all.for d/d& Res.pdt.ret.) 443000 515600 2.Amount of accounts receivables Avon wrote-Off during 2015 160200 3. Amount of Avon’s gross sales for the 2015 fiscal year 6076500+2700= 6079200 4. Amount of cash Avon collected from customers during the 2015 fiscal year 6172000 (Plug-in fig. of accounts receivables a/c
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