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Excerpts from Pekola Company's annual report are provided below:
(In millions)
Income Statement 2014 2013
Revenues (all on account) $17,154 $15,998
Net income 6,606 2,296
Balance Sheet
Current Assets:
Receivables, less allowance for uncollectibles of $338 and $308, respectively $ 3,052 $ 3,078
Footnotes
Provision for uncollectibles $ 385 $ 355

1. Are estimated uncollectibles increasing or decreasing as percentage of revenues?

2. What is meant by provision for uncollectibles? Why is this reported in the notes?

3. What amount of prepare-offs occurred during 2014? (remember the handy household hints for solving almost any weird accounting problem)

4. What was the cash collected on accounts receivables during 2014? (are you interested in gross or net receivables for this problem???)

5. What would you do with the provision for uncollectibles when preparing the statement of cash flows (indirect)? Why?

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  • Category:- Accounting Basics
  • Reference No.:- M939459

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