Problem 1:
Aaron Corporation reported the following data in the balance sheet of its 2008 annual report:
2007 2008
Accounts Receivable .................................... $172,500 $270,000
Less: Allowance for credit losses ........................ 8,550 12,000
a) What is the amount of accounts receivable which Aaron expected to collect in cash in future periods (beyond December 31, 2008)? That is, what is the net realizable value of Aaron's accounts receivable as of 12/31/2008?
b) The amounts of bad debt expense were listed in the income statement as $8,100 in 2008, and $5,700 in 2007. What amount of "write-offs" was taken during fiscal year 2008?
Problem 2:
Highland Corporation provided the following information for its accounts receivable, and the allowance for doubtful accounts:
2008 2007
Accounts receivable, less allowance ................ $120,700 $105,750
The allowance account was disclosed in the footnotes as $4,800 for 2008 and $4,100 for 2007.
a) What was the gross account receivable at the end of 2008?
b) Assume write-offs in 2008 totaled $3,750. How much was recognized as bad debt expense in 2008 income statement?