Reformulating Allowance for Doubtful Accounts and Bad Debt Expense Merck & Company reported the following from its 2016 financial statements.

$ millions 2013 2014 2015 2016 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . $7,184 $6,626 $6,484 $7,018 Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . 146 153 165 195

a. Compute accounts receivable gross for each year.

b. Determine the percentage of allowance to gross account receivables for each year. What trend do we observe?

c. Assume that we want to reformulate the balance sheet and income statement to reflect a constant percentage of allowance to gross accounts receivables for each year. Compute the four-year average and then reformulate the balance sheet and income statements for each of the four years. Follow the process shown in Analyst Adjustments 5.2 and assume a tax rate of 35%.