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Exercise 1 As of the end of 2019, Stanley Black & Decker had outstanding accounts receivables in the amount of $1.57 billion but only reported $1.45 billion on its balance sheet. (Pratt p 243) Why would this be the case? Exercise 2 For many years Sears offered financing to its customers through a separate credit card business. The company suffered from management problems in that business, recording increasingly large reserves (allowances) to cover growing bad debts. Several years ago Sears sold its credit card business to Citigroup, a large financial institution. (Pratt p 246) What does it mean that Sears recorded 'increasingly large reserves (allowances) to cover growing bad debts'? Why might Citigroup be better suited to manage receivables? Exercise 3 The accounts receivable footnote in Delphi Technologies' 2019 annual report provided the following information (dollars in millions). The change in the allowance for bad debts is as follows (Pratt p 247): $ Millions Balance at the beginning of the year Provision for bad debts Uncollected receivables written off Balance at the end of the year Explain the meaning of this information in terms of the three steps described above. 18 11 -5 24 Exercise 4 Several years ago, Quovadx Inc., a business software company, was being investigated by the SEC. Apparently, the company booked millions of dollars in revenue on sales made to a group of non-U.S. information-technology companies, and over the next two years had not received any payments from them. (Pratt p 248) How do you think Quovadx should account for these facts? Explain how a reader of the financial statements might have been able to detect such a problem. Exercise 5 Assume that you were hired by ABC Department Stores in 2018 to develop and implement a new credit policy. At the time of your hire, the average collection period for an outstanding receivable was in excess of 90 days (far greater than the industry average). Thus, the primary purpose of the new policy was to better screen credit applicants in an attempt to improve the quality of the company's accounts receivable. Shown as follows are sales and accounts receivable data for the past four years (in thousands). Sales S Average accounts receivable $ 2019 19,200 3,400 3,208 3,264 2021 2020 34,000 29,160 2018 18,000 3,600 Based on the given data, was the credit policy you developed successful? Explain

As of the end of 2015.5 anler Dlack & Decker had outatandint accounts teceivables in the amcent of 5157 bilien but only reported $1.45 bilion en its bulance sheet. (Pratt p 243) For many yean Sears affered firuncing to its cuvtbmers theough a separase credit card business. The compaty tuflered frem manatement problems in that busiress, recerdne increasingr taree neserves (allowances) te cover crowing bed debts. Siveral years ago Sears lold its eredit eard buiness to citeroup, a turge finandal inhtitution. (Pratt p 246) What does it mean that Sears recorded increasingly large reserves (allowances) to cover crowing bad debts? Why might Ceitroop be better sused to manage receivables? [xercise 3 The accousts teceivatle foptncte in Deiphi Technoloces' 2019 annual regert provided the folowing isformation (dollan in miliona) The change in the alkwance for bad debts a at follows (Pratt p 247): feclain the meaning of this information in terms of the three steps deceribed above. Extrisets Several years ago, Quovade inc, a budiness softeare comparv, was beine infritigated by the SEC. Apparently, the company booked maich of dollars in revenue on sales made to a group of non-U.S information-technolegy cbmpanies, and over the neat two vears had not received any payments from them. (Pratt p 248) How do you think Quovads should accocent for these facts? Eaplain how a reader of the financial statements might have bees able to detest wach a preblem Exercises Assume that you were hired by ABC Department 5 soret in 2018 so develep and implement a new creds policy. At the time of your hire, the average colkction period for an outitandirg receiveble wat in exsels of so days far greater thun the induatry averagel. Thus, the primary purpole of the new policy was to better screen tredit applicarts in an altempt to improve the quality af the compaty/s accounts rectervabie. Shown as folows are sales and acceunts receivable data for the past four vears in thochandh) Based on the given data was the credit policy you developed successfur? Exglainl

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