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Microsoft Excel LibreOffice Calc

Analysis of Bad Debts

Difficulty: Advanced

Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company's gross accounts receivable.The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.

Receivables Accounting Policy

Accounts Receivable

Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger airline tickets, customers of Delta's aircraft maintenance and cargo transportation services and other companies for the purchase of mileage credits under the frequent flyer program (the "SkyMiles program"). Delta provides an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses. Bad debt expense was not material in any period presented.

Source: Delta Air Lines Inc., Annual Report

Allowance for Doubtful Accounts Receivable

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Allowance for uncollectible accounts hidden hidden hidden hidden hidden
Accounts receivable, gross hidden hidden hidden hidden hidden
Allowance as a percentage of accounts receivable, gross1 hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Delta Air Lines Inc. Annual Reports

2017 Calculations

1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for uncollectible accounts ÷ Accounts receivable, gross
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Allowance as a percentage of accounts receivable, gross Allowance for doubtful accounts divided by the gross accounts receivable. Delta Air Lines Inc.'s allowance as a percentage of accounts receivable, gross increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.