World Biz operates divisions around the world. Its European division-Euro Biz (EB)-has recently reported the following information to you at World Biz's head office. You are trying to decide whether to direct your internal audit staff to investigate more closely. 

 

Required: 

1-a. For each of the years, calculate the proportion of gross accounts receivable estimated to be uncollectible as allowed for in the Allowance for Doubtful Accounts. 

1-b. Which year does not align with the other two? 

2-a. For each of the years, calculate the proportion of Net Sales Revenue that Bad Debt Expense represents. 

2-b. Which year does not align with the other two? 

3-a. Did customers take greater (or lesser) advantage of sales discounts in Year 5 than in Year 4 and Year 3? 

3-b. Does this indicate customers were more (or less) likely to promptly pay their balances in Year 5 as compared to prior years? 

4-a. Calculate the average days to collect in Year 5 and Year 4. 

4-b. Does this measure indicate customers paid their balances faster (or slower) in Year 5 as compared to Year 4? 

5. Indicate (yes or no) whether you should direct your internal audit staff to investigate EB's receivables management practices more closely.

how can i get the average Receivable?

Transcribed Image Text:

From the Financial Statement Notes Accounts Receivable (gross) Allowance for Doubtful Accounts Accounts Receivable, Net Other Information Gathered: Net Sales Revenue Accounts Receivable Write-offs Bad Debt Expense Sales Discounts (3/10, n/30) Year 5 $ 102,000 (5,100) 96,900 Year 5 $ 620,000 7,100 12,400 3,200 Year 4 $ 62,000 (6,200) 55,800 Year 4 $570,000 6,300 14,250 9,200 Year 3 $ 42,000 (4,200) 37,800 Year 3. $ 510,000 6,300 12,750 5,200 From the Financial Statement Notes Accounts Receivable (gross) Allowance for Doubtful Accounts Accounts Receivable, Net Other Information Gathered: Net Sales Revenue Accounts Receivable Write-offs Bad Debt Expense Sales Discounts (3/10, n/30) Year 5 $ 102,000 (5,100) 96,900 Year 5 $ 620,000 7,100 12,400 3,200 Year 4 $ 62,000 (6,200) 55,800 Year 4 $570,000 6,300 14,250 9,200 Year 3 $ 42,000 (4,200) 37,800 Year 3. $ 510,000 6,300 12,750 5,200

Answer rating: 100% (QA)

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