Accounts receivable consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for doubtful accounts and prompt payment discounts. Trade receivables do not bear interest. The allowance for doubtful accounts represents management's estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account balances are written off against the allowance when management determines the receivable is uncollectible. For the years ended 2019 and 2018, the Company did not have off-balance sheet credit exposure related to its customers. NOTE 18 SUPPLEMENTAL FINANCIAL STATEMENT DATA Consolidated Balance Sheet (millions) 2019 2018 Trade receivables $800 $1,500 Allowance for doubtful accounts (5) (15) Refundable income taxes 47 63 Other receivables 151 205 Accounts receivable, net $993 $1,753 Allowance for doubtful accounts (millions) 2019 2018 2017 Balance at beginning of year $3 $11 $4 Additions charged to expense 3 5 5 Doubtful accounts charged to reserve (1) (1) (5) Balance at end of year $5 $15 $4 (in millions) 2019 2018 Net sales $17,000 $16,400 Accounts receivable, net 993 1,753 Total assets 19,500 18,995 Requirement a. How is the carrying value of accounts receivable determined? The carrying value of the accounts receivable is ▼ . Part 2 Requirement b. What factors influence management's judgment in its estimate of the amount of collectible receivables? A. Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past recoveries and ability to factor with recourse. B. Management estimates the write-off of accounts receivable as the amount of probable credit losses in existing accounts receivable as determined from a review of past due revenues and expenses. C. Management estimates uncollectible accounts in existing accounts receivable as determined from a review of past percentage of assets and percentage of sales. D. Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past due balances and other specific account data. Part 3 Requirement c. What is the percent of trade receivables to total assets at the end of 2019 and 2018? (Round the percentage to the nearest hundredth percent, X.XX%.) The percent of trade receivables to total assets is % at the end of 2019 and % at the end of 2018.

Accounts receivable consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for doubtful accounts and prompt payment discounts. Trade receivables do not bear interest. The allowance for doubtful accounts represents management's estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account balances are written off against the allowance when management determines the receivable is uncollectible. For the years ended 2019 and 2018, the Company did not have off-balance sheet credit exposure related to its customers. NOTE 18 SUPPLEMENTAL FINANCIAL STATEMENT DATA Consolidated Balance Sheet (millions) 2019 2018 Trade receivables $800 $1,500 Allowance for doubtful accounts (5) (15) Refundable income taxes 47 63 Other receivables 151 205 Accounts receivable, net $993 $1,753 Allowance for doubtful accounts (millions) 2019 2018 2017 Balance at beginning of year $3 $11 $4 Additions charged to expense 3 5 5 Doubtful accounts charged to reserve (1) (1) (5) Balance at end of year $5 $15 $4 (in millions) 2019 2018 Net sales $17,000 $16,400 Accounts receivable, net 993 1,753 Total assets 19,500 18,995 Requirement a. How is the carrying value of accounts receivable determined? The carrying value of the accounts receivable is ▼ . Part 2 Requirement b. What factors influence management's judgment in its estimate of the amount of collectible receivables? A. Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past recoveries and ability to factor with recourse. B. Management estimates the write-off of accounts receivable as the amount of probable credit losses in existing accounts receivable as determined from a review of past due revenues and expenses. C. Management estimates uncollectible accounts in existing accounts receivable as determined from a review of past percentage of assets and percentage of sales. D. Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past due balances and other specific account data. Part 3 Requirement c. What is the percent of trade receivables to total assets at the end of 2019 and 2018? (Round the percentage to the nearest hundredth percent, X.XX%.) The percent of trade receivables to total assets is % at the end of 2019 and % at the end of 2018.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle

Section: Chapter Questions

Problem 20MCQ

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Part 2

Requirement b. What factors influence management's judgment in its estimate of the amount of collectible receivables?

A. Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past recoveries and ability to factor with recourse.

B. Management estimates the write-off of accounts receivable as the amount of probable credit losses in existing accounts receivable as determined from a review of past due revenues and expenses.

Management estimates uncollectible accounts in existing accounts receivable as determined from a review of past percentage of assets and percentage of sales.

Management estimates the allowance of doubtful accounts as the amount of probable credit losses in existing accounts receivable as determined from a review of past due balances and other specific account data.

Part 3

Requirement c. What is the percent of trade receivables to total assets at the end of 2019 and 2018? (Round the percentage to the nearest hundredth percent, X.XX%.)

The percent of trade receivables to total assets is

% at the end of 2019 and

% at the end of 2018.

Part 4

Requirement d. What is the percent of the allowance for uncollectible accounts to total trade receivables in 2019 and 2018? (Round the percentage to the nearest one thousandth percent, X.XXX%.)

The percent of the allowance to trade receivables is

% in 2019 and

% in 2018.

Part 5

Requirement e. What were Corney's write-offs of accounts receivable in

2019 and 2018? (Enter amounts in millions as provided to you in the problem statement, X.X.)

Corney's write-offs of accounts receivable were

million in 2019 and

million in 2018.

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NOTE 18
SUPPLEMENTAL FINANCIAL STATEMENT DATA
Consolidated Balance Sheet (millions)	2019	2018
Trade receivables	$800	$1,500
Allowance for doubtful accounts	(5)	(15)
Refundable income taxes	47	63
Other receivables	151	205
Accounts receivable, net	$993	$1,753

Allowance for doubtful accounts (millions)	2019	2018	2017
Balance at beginning of year	$3	$11	$4
Additions charged to expense	3	5	5
Doubtful accounts charged to reserve	(1)	(1)	(5)
Balance at end of year	$5	$15	$4

(in millions)	2019	2018
Net sales	$17,000	$16,400
Accounts receivable, net	993	1,753
Total assets	19,500	18,995