Use Newell Brands, Inc.'s financial statement information to answer the following questions.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Use Newell Brands, Inc.'s financial statement information to answer the following questions.
- Provide the following account balances for Newell Brands :
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December 31, 2020 |
December 31, 2019 |
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Accounts Receivable (gross) |
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Allowance for Doubtful Accounts |
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Accounts Receivable, net |
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- Which of the above numbers represents the total amount Newell Brands is owed by customers as of December 31, 2020?
- Which of the above numbers represents the amount that Newell Brands believes it will not collect from its customers as of December 31, 2020?
- Which of the above numbers represents the amount that Newell Brands believes it will collect from its customers as of December 31, 2020?
- Provide the
journal entry (both accounts and amounts) that Newell Brands must have made to record its estimate ofBad Debt Expense in 2020.
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- Provide the journal entry (both accounts and amounts) that Newell Brands must have made to record Accounts Receivable write-offs in 2020.
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Newell Brands, Inc. Financial Statements (partial)
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Consolidated Balance Sheets In millions of dollars |
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ASSETS |
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As of Dec 31, 2020 |
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As of Dec 31, 2019 |
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Cash and cash equivalents |
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$ 981 |
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$ 349 |
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Accounts receivable, net of the allowance of $36 million as of 1/31/2020 and of $29 million as of 1/31/2019 |
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1,678 |
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1,842 |
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Inventories |
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1,638 |
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1,606 |
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Prepaid expenses and other current assets |
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331 |
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313 |
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Total current assets |
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$ 4,628 |
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$ 4,110 |
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Notes to Consolidated Financial Statements (partial) |
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Footnote 1. Summary of Significant Accounting Policies
1.9 Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivables, net, include amounts billed and due from customers. Payment terms vary but generally are 90 days or less. An allowance for expected credit losses is based on the amount it ultimately expects to collect from its customers. The Company evaluates the collectability of accounts receivable based on a combination of factors including the length of time the receivables are past due, historical collection experience, current market conditions and
The Allowance for Doubtful Accounts was $36 million at December 31, 2020, and $29 million at December 31, 2019.
The Company recorded Bad Debt Expense of $17 million in 2020 and $11 million in 2019.
The Company wrote off $10 million of accounts receivable in 2020 and $9 million of accounts receivable in 2019. |
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