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

[pic 1]

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