Nike, Inc., is a leading manufacturer of sports apparel, shoes, and equipment. T

Question

Nike, Inc., is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2015 financial statements contain the following information (in millions):

2015 2014 Balance sheets: Accounts receivable, net $ 3,358 $ 3,434 Income statements: Sales revenue $ 30,601 $ 27,799 Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2015. (Enter your answers in millions.) Gross Accounts Receivable Beg. bal. 3,512 30,601 Sales 20 Write-offs 30,657 Collections End. bal 3,436

Explanation / Answer

a) 2015 2014 Ending Accounts receivable, net $3,358.00 $3,434.00 Allowance for uncollectible accounts $78.00 $78.00 Gross Accounts Receivable $3,436.00 $3,512.00 Millions b) Using the direct Write-off method Beginning balance $78.00 Less Write-offs -$20.00 Balance before Y/E Adjustments $58.00 Y/E Adjustment $20.00 Ending Balance $78.00 Amount of bad debt write-offs during 2015 = $20.00 c) Gross Accounts Receivable Beginning Balance (Gross A/R 2015) $3,512.00 Add: credit sales $30,601.00 Write off $20.00 Collections $30,657.00 Ending Bal. (Gross A/R 2015) $3,436.00 Cash received from customers during 2015 = $3512 + $30,601 - $20 - $3436 $30,657.00 d) Net Accounts Receivable Beginning Net Account Receivables $3,434.00 Sales $30,601.00 Cash collected from Customers -$30,657.00 Bad debts Expenses -$20.00 Write offs (Accounts Receivables) $20.00 Write offs (Allowance for uncollectible Accounts) -$20.00 Ending Net Accounts Receivables $3,358.00 Note that write-offs cancel when reconciling net accounts receivable, because the journal entry to recognize write-offs debits the Allowance for uncollectible accounts and credits Accounts receivable. However, we have to make sure to include the credit to Bad debts expense, as that increases the Allowance for uncollectible accounts and therefore decreases Net accounts receivable

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