Pearson Accounts Receveible
Headquartered in London, England, Pearson is an international company with businesses in education, business information and consumer publishing. Pearson education operations provide learning materials, technologies, assessments and services to educational institutions, corporations and professional organizations, as well as to teachers and students of all ages. In its business information division, Pearson operates FT Publishing, which includes the Financial Times, FT. com and a range of other financial magazines, online services and financial databases. Pearson 's consumer operations, Penguin, operates a series of connected national publishing houses. With sales of £5. 6 billion in 2009, Pearson operates in more than 60 countries. Financial statements are prepared in accordance with IFRS. Shares trade in London and New York (Source: Company Annual Report and Form 20-F)
Refer to the Pearson plc financial statements and footnote excerpts for 2009. All figures are in millions of pounds sterling (L).
a. What is an account receivable? What other names does this asset go by?
b. How do accounts receivable differ from notes receivable?
c. What is a contra account? What two contra accounts are associated with Pearson's trade receivables (see Note 22)? What types of activities are captured in each of these contra accounts? Describe factors that managers might consider when deciding how to estimate the balance in each of these contra accounts.
d. Two commonly used approaches for estimating uncollectible accounts receivable are the percentage -of-sales procedure and the aging-of-accounts procedure. Briefly describe these two approaches. What information do managers need to determine the activity and final account balance under each approach? Which of the two approaches do you think results in a more accurate estimate of net accounts receivable?
e. If Pearson anticipates that some accounts will be uncollectible, why did the company extend credit to those customers
Refer to the Pearson plc financial statements and footnote excerpts for 2009. All figures are in millions of pounds sterling (L).
a. What is an account receivable? What other names does this asset go by?
b. How do accounts receivable differ from notes receivable?
c. What is a contra account? What two contra accounts are associated with Pearson's trade receivables (see Note 22)? What types of activities are captured in each of these contra accounts? Describe factors that managers might consider when deciding how to estimate the balance in each of these contra accounts.
d. Two commonly used approaches for estimating uncollectible accounts receivable are the percentage -of-sales procedure and the aging-of-accounts procedure. Briefly describe these two approaches. What information do managers need to determine the activity and final account balance under each approach? Which of the two approaches do you think results in a more accurate estimate of net accounts receivable?
e. If Pearson anticipates that some accounts will be uncollectible, why did the company extend credit to those customers