Murica Ltd. has the following receivables balances ($M): Gross accounts receivable Bad-debt reserve Net accounts receivable...

 

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Murica Ltd. has the following receivables balances ($M): Gross accounts receivable Bad-debt reserve Net accounts receivable $ 171 Two years ago a customer was approved for an unusually large credit sale of $7M over the objections of the credit and collections department. Shortly after the sale, the customer's business began to deteriorate due to an unexpected recession. To date it has paid only $3M against the order despite the fact that it has consumed all of the material purchased. The collections department has worked diligently to collect the remaining $4M without success. The customer filed for bankruptcy this morning with essentially no assets to pay a large number of creditors. Evaluate the financial statement impact of the bankruptcy on Canaday. Assume Canaday's product cost is 40% of revenue and the bad-debt reserve of $3M will be fully reestablished. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Immediate effect on the balance sheet Gross accounts receivable Bad-debt reserve $ 174 (3) Net accounts receivable $ The pretax loss due to the write off this year: $ million million million million Murica Ltd. has the following receivables balances ($M): Gross accounts receivable Bad-debt reserve Net accounts receivable $ 171 Two years ago a customer was approved for an unusually large credit sale of $7M over the objections of the credit and collections department. Shortly after the sale, the customer's business began to deteriorate due to an unexpected recession. To date it has paid only $3M against the order despite the fact that it has consumed all of the material purchased. The collections department has worked diligently to collect the remaining $4M without success. The customer filed for bankruptcy this morning with essentially no assets to pay a large number of creditors. Evaluate the financial statement impact of the bankruptcy on Canaday. Assume Canaday's product cost is 40% of revenue and the bad-debt reserve of $3M will be fully reestablished. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Immediate effect on the balance sheet Gross accounts receivable Bad-debt reserve $ 174 (3) Net accounts receivable $ The pretax loss due to the write off this year: $ million million million million

Answer rating: 100% (QA)

Gross assets 170 million Bad debts reserve 3 million Net assets ... View the full answer