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This problem takes you through the accounting for sales receivables and uncollectibles for FedEx Corporation the overnight shipper By selling on credit, FedEx cannot expect to collect 100% of its

This problem takes you through the accounting for sales, receivables, and uncollectibles for FedEx Corporation, the overnight shipper. By selling on credit, FedEx cannot expect to collect 100% of its accounts receivable. At May 31, 20X6, and 20X5, respectively, FedEx reported the following on its balance sheet (adapted and in millions of dollars):

 

May 31,

 

20X6

20X5

Accounts receivable

$3,660

$3,422

Less: Allowance for uncollectibles

$3,516

$3,297

Accounts receivable, net

(144)

(125)

During the year ended May 31, 20X6, FedEx earned service revenue and collected cash from customers. Assume uncollectible-account expense for the year was 1% of service revenue and that FedEx wrote off uncollectible receivables. At year end FedEx ended with the foregoing May 31, 20X6, balances.

Required

1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectibles and insert the May 31, 20X5, balances as given.

2. Journalize the following assumed transactions of FedEx, Inc., for the year ended May 31, 20X6 (explanations are not required).

a. Service revenue on account, $32,300 million.

b. Collections on account, $31,758 million.

c. Uncollectible-account expense, 1% of service revenue.

d. Write-offs of uncollectible accounts receivable, $304 million.

3. Post your entries to the Accounts Receivable and the Allowance for Uncollectibles T-accounts.

4. Compute the ending balances for the two T-accounts and compare your balances to the actual May 31, 20X6, amounts. They should be the same.

5. Show what FedEx would report on its income statement for the year ended May 31, 20X6.

Jun 18 2020 View more View Less

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