# Revenue Recognition, Accounts Receivable, Uncollectible Accounts – New York Times

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### Revenue Recognition, Accounts Receivable, Uncollectible Accounts – New York Times

Part I:  Revenue Recognition, Accounts Receivable, Uncollectible Accounts – New York Times

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The New York Times Company is engaged in diversified activities in media such as newspapers, magazines, televisions and radio stations.  For simplicity, assume that any unearned revenue is only due to newspaper subscriptions.  Using the 2000 balance sheet and supplementary footnote, please answer the following questions.  Assume that all numbers are in thousands.

1. When does the NY Times recognize revenue on the sale of newspapers? (describe)

The sales are calculated on a pro-rata basis over the term of the subscription, so this means the sales are registered as the subscriptions are fulfilled by the newspaper and not when they are sold to costumers.

1. As of the end of 2000, what was the total value of newspaper subscriptions that NYTimes customers had paid, but that the NY Times had not yet recognized as revenue?

Unexpired subscriptions 87,130 – (The NYTimes own customer the newspaper )

1. What percentage of its outstanding accounts receivable does the NYTimes not expect to collect?
 Total accounts receivable 341863 Net Allowance 44169 Net Allowance 44169 (/)  Net Allowance+Total accounts receivable 386032 11%

1. Assume that sales of newspaper subscriptions during 2000 were \$765,000.  How much revenue did the NYTimes recognize in 2000 related to newspapers?
 Sales 765000 (-)Unexpired sub 2000 87130 (+)Unexpired sub 1999 80161 Revenue 758031
1. Assume that total revenues for the year 2000 were \$3,490,000 (this includes the subscription revenue above, as well as revenue from other sources).  Also, assume that the NYTimes wrote-off \$37,000 of accounts receivable as permanently uncollectible during 2000.
1. How much did the NYTimes recognize as bad debt expense?
 Beg 39749 (-)Writeoff 37000 (+)Bad debt X 41410 Beg 44159
1. Approximately how long does it take them to collect money from their customers, on average?  For simplicity, you can use the ‘net’ numbers in your calculations.  Comment on whether this number is good or bad.

Average collection period = days*A/R

365*(341,863/3490000) = 35.7 days

CONSOLIDATED BALANCE SHEETS              December 31,   December 26,[pic 2]

(In thousands)                                             2000          1999

ASSETS

CURRENT ASSETS

Cash and cash equivalents                            \$   69,043   \$   63,861

Accounts receivable (net of

allowances: 2000 – \$44,169; 1999 – \$39,749)           341,863      366,754

Inventories                                              35,064       28,650

Deferred income taxes                                    62,939       53,611

Other current assets                                    101,857      102,032

Total current assets                                      610,766      614,908

INVESTMENT IN JOINT VENTURES                              107,320      121,940

PROPERTY, PLANT AND EQUIPMENT

Land                                                     72,228       67,149

Buildings & Equipment                                 2,216,046    2,128,014

Total – at cost                                        2,288,274    2,195,163

Less accumulated depreciation                         1,081,114      976,767

Property, plant and equipment – net                     1,207,160    1,218,396

INTANGIBLE ASSETS                                       1,681,433    1,540,558

——————————————————————————-

Total                                                  \$3,606,679   \$3,495,802

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Commercial paper outstanding                        \$   291,251   \$       —

Accounts payable                                        178,302      191,706

Accrued payroll and other related liabilities           318,088      298,810

Unexpired subscriptions                                  87,130       80,161

Current portion of long-term debt                         2,599      102,837

Total current liabilities                                 877,370      673,514