Net Realizable Value

COMPREHENSIVE PROBLEM (Chapters 6, 7, and 8)
Case A Req. 1 (in millions) Allowance for uncollectible accounts (XA, +A) 1 ............. Accounts receivable (A)............................................ Req. 2 Cash collections for 2008 2 were $5,711 million. Allowance for Uncollectible Accounts 20 Beg. 5 Bad debt Write-offs ? expense 13 End.

12 12

Accounts Receivable Beg. 558 Sales 5,710 ? Collections ? Write-offs End. 545

-

= Net Realizable Value 538

532

1 Beg. allowance $20 + Bad debt expense $5 – Write-offs ? = End. Allowance $13 Write-offs = $12 2 Beg. accounts receivable $558 + Sales $5,710 – Write-offs $12 – Collections ? = End. accounts receivable $532 Collections = $5,711 Req. 3 2006 2007 2008 Net Income 510 497 $(312) ÷ Net Sales 4,700 5,695 $5,710 = Net Profit Margin 10.85% 8.73% (5.46)%

The company’s net profit margin has fallen each year while net sales have risen, with a net loss reported in 2008. This suggests that, although Dr Pepper Snapple’s management has generated increasing sales revenue over time, it is having greater difficulty each year controlling costs and expenses. Case B Req. 1 The company should record bad debt expense of $13,900 for 2011. Req. 2 Under current assets on the 2011 balance sheet: Accounts receivable, net of the allowance for doubtful accounts of $12,400
Accounts Receivable Allowance for Uncollectible Accounts 1,500 Unadj. bal. Bad debt 13,900 expense 12,400 End.

$607,600
Net = Realizable Value

End. 620,000

607,600

Unadj. allowance bal. $(1,500) + Bad debt expense ? = End. bal. $12,400 Bad debt expense = $13,900 Case C Req. 1 The company should record bad debt expense of $481,350 for 2012. Req. 2 Under current assets on the 2012 balance sheet: Accounts receivable, net of the allowance for doubtful accounts of $490,550

$5,349,450

Accounts Receivable

-

End. 5,840,000

Allowance for Uncollectible Accounts 9,200 Unadj. bal. Bad debt 481,350 expense 490,550 End.

Net =