Johnson Mills reported the following information in its 2015 financial statement

Question

Johnson Mills reported the following information in its 2015 financial statements ($ in millions):

A note disclosed that the allowance for uncollectible accounts had a balance of $48.4 million and $44.5 million at the end of 2015 and 2014, respectively. Bad debt expense for 2015 was $34.8 million.

Required:

Determine the amount of cash collected from customers during 2015. (All sales are on credit. Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

2015 2014 Balance Sheets: Accounts receivable, net $ 3,350.2 $ 2,277.4 2015 Income statement: Sales revenue $ 19,683.6

Explanation / Answer

Allowance for doubtful accounts for 2014 = $44.5 million

Bad debt expense for 2015 = 34.8 million

Therefore, the balance of allowance for doubtful accounts for 2015 should have been $79.3 million ($44.5 million + $34.8 million). However, it is 48.4 million. This means, $30.9 million ($79.3 million - $48.4 million) of accounts receivable were written off during 2015.

Now calculate cash collected from customers as follows:

Cash collected from customers

= Beginning balance of accounts receivable + Sales - Ending balance of accounts receivable - Accounts written off

= (2,277.4 + 44.5) + 19,683.6 - (3350.2 + 48.4) - 30.9

= 18,576 million

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