a. ABC, Inc provides a variety of components and machinery used by bedding manufacturers in the production and assembly of their finished products (financial information provided on the next page). What do you think are the specific factors that ABC, Inc. considers when estimating bad debt expense for a period?

b. What is ABC, Inc.s gross amount of receivables at the end of 2018 and 2017?

c. Compute the allowance for doubtful accounts to gross accounts receivable, for both years. Interpret the year-over-year change in this ratio. Provide an opinion about the quality of the companys accounts receivable.

ABC, Inc. reported net sales of $6,749.9 million in 2018 and $6,917.2 million in 2017. The asset side of the balance sheet follows. Use this information to answer the required. ABC, INCORPORATED Consolidated Balance Sheets (excerpts) (in millions) Dec. 31, 2018 Dec. 31, 2017 Current Assets Cash and cash equivalents $281.9 $ 253.2 Trade receivables, net of allowance $7.2 and $9.3, at December 31, 2018 and 2017, respectively 450.8 448.7 Other receivables, net 35.8 71.5 Total receivables, net 486.6 520.2 Inventories Finished goods 255.7 242.8 Work in process 52.6 42.6 Raw materials and supplies 245.1 241.8 LIFO reserve (33.8) (22.6) Total inventories, net 519.6 504.6 Prepaid expenses and other current assets 36.8 33.2 Total current assets 1,324.9 1,311.2 Property, plant and equipment - at cost Machinery and equipment 1,133.8 1,099.1 Buildings and other 559.4 548.2 Land 37.7 40.0 Total property, plant and equipment 1,730.9 1,687.3 Less accumulated depreciation (1,165.4) (1,146.5) Net property, plant and equipment 565.5 540.8 Other Assets Goodwill 791.3 806.1 Other intangibles, less accumulated amortization of $137.0 and $139.8 at December 31, 2018 and 2017, respectively 164.9 188.4 Sundry 137.5 117.2 Total other assets 1,093.7 1,111.7 Total assets $2,984.1 $2,963.7