Question
Adjusting Allowance for Doubtful Accounts and Bad Debts Expense Merck & Company reported the following from its 2019 financial statements. $ millions2016201720182019Accounts receivable, net$7,018$6,873$7,071$6,778Allowance for
Adjusting Allowance for Doubtful Accounts and Bad Debts Expense
Merck & Company reported the following from its 2019 financial statements.
$ millions2016201720182019Accounts receivable, net$7,018$6,873$7,071$6,778Allowance for doubtful accounts19515911986
a. Compute accounts receivable gross for each year.$ millions2016201720182019Accounts receivable, grossAnswer
Answer
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b. Determine the percentage of allowance to gross account receivables for each year.
Round answers to two decimal places (ex: 0.02345 = 2.35%).
2016201720182019% allowanceAnswer
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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 22% in all three years.
Four- year average of percentage of allowance to gross accounts receivables.
Round answer to two decimal places (ex: 0.02345 = 2.35%)
Answer
%Reformulate the balance sheet and income statements.
- Use rounded answer above for computations, then round answers to nearest whole number.
- Use negative signs with answers to indicatethe adjustment decreasesan account.
2016201720182019Adjusted allowance for doubtful accts.Answer
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Balance Sheets AdjustmentsAllowance for doubtful accountsAnswer
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Accounts receivable, netAnswer
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Deferred tax liabilitiesAnswer
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Retained EarningsAnswer
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Income Statements AdjustmentsBad debts expenseAnswer
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Income tax expense at 22%Answer
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Net IncomeAnswer
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Contemporary Business Mathematics with Canadian Applications
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
11th edition
134141083, 978-0134141084
