Financial Accounting: In an Economic Context

BRIEF EXERCISES

REAL DATA

BE6-1

Analysis of accounts receivable

The following information was taken from the 2009 annual report of Emerson Electric Co., a leader in the network power sector (dollars in millions):

a. Compute total accounts receivable as of the end of 2009 and 2008, and compute the bad debt allowance as a percentage of total accounts receivable. Did the percentage increase or decrease?

b. The bad debt expense reported on Emerson's 2009 income statement did not equal $93. Explain why.

REAL DATA

BE6-2

Uncollectible accounts expense

The following information was taken from the 2009 annual report of Emerson Electric Co., a leader in the network power sector (dollars in millions):

a. What dollar amounts of bad debt expense were recognized on the 2008 and 2007 income statements? Why do you think the figure changed so dramatically?

b. What dollar values of customer accounts were written off the books in 2008 and 2007?

c. By what percentage did the allowance account change from 2007 to 2008, and what are several reasons why this may have occurred?

REAL DATA

BE6-3

Uncollectible accounts expense

General Electric's financing subsidiary (GE Capital Services—GECS) provides financing services for GE's customers. If you purchase a GE appliance, for example, you could finance it through ...