Question

An annual report for Bombardier Inc. contained the following information at the end of its fiscal year (in millions of dollars):
A footnote to the financial statements disclosed that uncollectible accounts of $ 5 million and $ 17 million were written off as bad debts during years 1 and 2, respectively. Assume that the tax rate for Bombardier was 30 percent.
Required:
1. Determine the bad debt expense for year 2 based on the preceding facts.
2. Working capital is defined as current assets minus current liabilities. How was Bombardier’s working capital affected by the write- off of $ 17 million in uncollectible accounts during year 2? What impact did the recording of bad debt expense have on working capital in year 2?
3. How was net earnings affected by the $ 17 million write- off during year 2? What impact did recording bad debt expense have on net earnings for year 2?


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  • CreatedAugust 04, 2015
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