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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear

Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com.

Required:

Look at Under Armour’s Note 2 (Summary of Significant Accounting Policies) under the heading Allowance for Doubtful Accounts. Based on this disclosure, what is the balance in the allowance for doubtful accounts for 2015 and 2016? If actual losses from uncollectible accounts differ enough from the estimates in the allowance for doubtful accounts, where would Under Armour record a benefit or charge?

To determine

Concept introduction:

Allowance for doubtful debts:

Companies generally make credit sales to improve their business and expand their customer base. When a credit sales is made the amount that the company has to receive from its customers is known as receivable. Usually all the customers does not repay the amount they owe to the company and hence there are chances of some not repaying the amount and these are called as bad debts. The company usually estimates that a portion of its receivables will become bad debts and create provisions for the same. This provision is called as allowance for doubtful debts.

Look for Under Armour’s allowance for doubtful accounts in Note 2 and indicate the balances for 2015 and 2016. Indicate if the actual; losses exceeds the estimates of doubtful accounts provision then where would Under Armour record a benefit or charge to the selling, general and administration expenses.

Explanation

The balance of allowance for doubtful accounts for 2015 and 2016 had been taken from Cengage brain website upon referring Note 2. The allowance for doubtful accounts for 2015 and 2016 is $94.5 million and $11.3 million respectively.

If the actual losses differs from the estimates and reserved as allo...

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