Reference no: EM132436084
ACC120 - Accounting Basics Assignment, Seneca College, Canada
Question - Shaw Communications Inc. is a diversified Canadian communications company whose core operating business is providing broadband cable television services, Internet, telecommunications services, satellite services, and programming content. The following selected information (in millions) was taken from Shaw's financial statements for the fiscal years 2015 to 2017:
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2017
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2016
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2015
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Operating revenues (assume all credit)
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$4,882
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$4,884
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$4,486
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|
Cash
|
507
|
405
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398
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Accounts receivable (gross)
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334
|
310
|
494
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Allowance for doubtful accounts
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48
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42
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26
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Inventories
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109
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65
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60
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Other current assets
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155
|
138
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78
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Total current liabilities
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1,392
|
1,819
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1,938
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Additional details about Shaw's receivables include the following:
Bad debt expense (or provision for doubtful accounts, as Shaw calls it) of $40 (2016, $28; 2015, $29) is included in operating, general, and administrative expenses. Shaw writes off uncollectible accounts receivable against the allowance account based on the age of the account and payment history.
Instructions -
a. Calculate the current ratios, acid-test ratios, receivables turnover ratios, and average collection periods for fiscal 2017 and 2016. Comment on Shaw's liquidity for each of the years.
b. Based on the information provided, calculate the amount of accounts receivable that was written off in 2017.
c. Shaw indicates in its notes to the financial statements that it reduces the risk of uncollectible accounts by billing in advance of providing service. How does billing in advance of providing service reduce the risk of uncollectible accounts?