Analyzing and Interpreting Receivables and Related Ratios Following is the current asset section from Intuit Inc.’s balance sheet. Total revenues were $4,694 million

($1,289 million in product sales and $3,405 million in service revenues and other) in 2016.

July 31 ($ millions) 2016 2015 Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $638 $ 808 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 889 Accounts receivable, net of allowance for doubtful accounts of $51 and $45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108 91 Income taxes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 84 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 231 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 102 94 Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 26 Current assets before funds held for customers . . . . . . . . . . . . . . . . . . . . . 1,310 2,223 Funds held for customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 337 Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,614 $2,560 Required

a. What are Intuit’s gross accounts receivable at the end of 2015 and 2016?

b. For both 2016 and 2015, compute the ratio of the allowance for uncollectible accounts to gross receivables.

What trend do you observe?

c. Compute the receivables turnover ratio and the average collection period for 2013 based on gross receivables computed in part

a. Does the collection period (days sales in receivables) appear reasonable given Intuit’s lines of business (Intuit’s products include QuickBooks, TurboTax, and Quicken, which it sells to consumers and small businesses)? Explain.

d. Is the percentage of Intuit’s allowance for uncollectible accounts to gross accounts receivable consistent with what you expect for Intuit’s line of business? Explain.

e. Intuit discloses the following table related to its allowance for uncollectible accounts from its 10-K.

Comment on the change in the allowance account during 2015 through 2016.

Allowance for Doubtful Accounts

($ millions)

Beginning Balance Additions Charged to Expense Deductions Ending Balance Year ended July 31, 2016. . . . . . . . . . . . . . . . . . $45 $49 $(43) $51 Year ended July 31, 2015. . . . . . . . . . . . . . . . . . $40 $57 $(52) $45 Year ended July 31, 2014. . . . . . . . . . . . . . . . . . $38 $50 $(48) $40