Electronic Case - Accounts Receivable and Bad Debts - Cisco Systems
Accounts Receivable and Bad Debts - Cisco Systems
Cisco Systems is the world leader in providing network solutions that connect computing devices and computer networks, allowing people to access or transfer information without regard to differences in time, place, or type of computer system.
Analysis:
1. Briefly describe the allowance method of accounting for bad debts.
2. Using EDGAR (or the company's website), access Cisco System's 10-K for the period ending 7/30/05 and answer the following questions (Here is a direct link to the company's website containing a link to the appropriate annual report):
- What was the amount of Cisco's gross accounts receivable at the end of the current year?
- Determine the amount of actual bad debt write-offs made during the year (Hint: check the statement of cash flows as well as the balance sheet)?
- Why do you think the company recorded zero bad debt expense (provision for doubtful accounts) in 2005?
- Compute the company's accounts receivable turnover ratio and average collection period for the current year. Does your answer appear reasonable?
Here is the solution to this case.