6-73 Discounts and Doubtful Items

Eli Lilly, a major pharmaceutical company, includes the following in its December 31, 2011, balance sheet ($ amounts in millions):

Accounts receivable, net of allowances of $110.1

$3,597.7

Compute the ratio of the allowance for doubtful items to gross accounts receivable for December 31, 2011. In 2009, this ratio was 3.4%. What are some possible reasons for the changes in this ratio?

Independent of the actual balances, prepare a journal entry to write off an uncollectible account of $210,000 on January 2, 2011.