Question

Gemstone Products located in New York City, is one of the world's largest producers of beauty and related products. The company's consolidated balance sheets for the 2016 and 2015 fiscal years included the following ($ in thousands):

	2016			2015
Current assets:
Receivables, less allowances of $133,115 in 2016 and $88,715 in 2015	$	461,500		$	441,300

A disclosure note accompanying the financial statements reported the following ($ in thousands)

	Year Ended
	2016				2015
	(In thousands)
Calculation of account receivables, net:
Receivables	$	594,615			$	530,015
Less: allowance for doubtful accounts		(123,095	)			(77,795	)
Less: reserve for product returns		(10,020	)			(10,920	)
Trade accounts receivable, net:	$	461,500			$	441,300

Assume that the company reported bad debt expense in 2016 of $192,300 and had products returned for credit totaling $187,195 (sales price). Net sales for 2016 were $5,643,800 ($ in thousands).

Required:
1. What is the amount of accounts receivable due from customers at the end of 2016 and 2015?
2. What amount of accounts receivable did Gemstone write off during 2016?
3. What is the amount of Gemstone's gross sales for the 2016 fiscal year?
4. Assuming that all sales are made on a credit basis, what is the amount of cash Gemstone collected from customers during the 2016 fiscal year?

Req 1 Reg 2 to 4 What is the amount of accounts receivable due from customers at the end of 2016 and 2015? (Ente thousands.) 2016 2015 Accounts receivable (gross)

Answer 1

1. Amount of accounts receivable due from customers at end of 2016 and 2015 can be computed as:

Accounts receivable (net) Add: Allowances Accounts receivable (gross) 2016 2015 $461,500 $441,300 $133,115 $88,715 $594,615 $530,015

2. Amount of accounts receivable write off by Gemstone in 2016 can be computed as:

Allowance for doubtful accounts: Beginning balance Add: bad debt expense Less: closing balance end of the year Bad debts written off in 2016 $77,795 $192,300 (123,095) $147,000

The accounts receivable written off is $147,000.

3.Amount of gross sales of Gemstone for 2016 can be computed as:

Gross sales for the year=Net sales+Estimated sales returns

Balance, end of the year Add:actual returns Less: balance, beginning of the year Estimated sales returns $10,020 $187,195 ($10,920) $186,295

Gross sales for the year=$5,643,800+$186,295

Gross sales for the year 2016=$5,830,095

4. Amount of cash collected from customers by Gemstone in 2016 can be computed as:

Accounts receivable analysis Balance, beginning of the year $530,015 Add: credit sales $5,830,095 Less: bad debts write off ($147,000) Less: actual sales returns ($187,195) Less: balance end of the year ($594,615) Cash collected from customers 2016 $5,431,300