I would like some help on how to calculate this question below. See attached screenshot for the information. Thank you!
(e) If Grainger had kept its 2009 allowance for uncollectible accounts at the same percentage of gross accounts receivable as it was in 2007, by what amount would its profit have changed (ignore taxes)? HINT: Use rounded answer from part b to calculate. Round answer to the nearest thousands.
4/27/2020 CHAPTER 5 Started on Thursday, 27 February 2020, 3:29 PM State Finished Question 6 Partially correct Mark 0.92 out of 1.00 Interpreting Accounts Receivable and Its Footnote Disclosure Following is the current asset section from the W.W. Grainger, Inc., balance sheet. As of December 31 ($ 000s) 2009 2008 2007 Cash and cash equivalents $ 459,871 $ 396,290 $ 133,531 Accounts receivable (less allowances fordoubtful accounts of $25,850, $26,481and $25,830, respectively 624,910 589,416 602,650 Inventories, net 889,679 1,009,932 946,327 Prepaid expenses and other assets 88,364 73,359 61,666 Deferred income taxes 42,023 52,556 56,663 Prepaid income taxes 26,668 22,556 Total current assets $ 2,131,515 $ 2,144,109 $ 1,800,837 Grainger reports the following footnote relating to its receivables. Allowance for Doubtful Accounts: The following table shows the activity in the allowance for doubtful accounts. For Years ended D er 31 ($ 000s) 2009 2007 Allowance for doubtful accounts- accounts receivable Balance at beginning of period $ 26,481 $ 25,830 $ 18,801 Provision for uncollectable accounts 10,748 12,924 15,436 Write-off of uncollectible accounts, less recoveries (12,254) (11,501) (8,755) Foreign currency exchange impact 875 (772) 348 Balance at end of period $ 25,850 $ 26,481 $ 25,830 (a) What amount do customers owe Grainger at each of the year-ends 2007 through 2009? ($ 000s) 2009 2008 2007 Gross accounts receivable $ 650,760 v $ 615,897 v $ 628,480 (b) What percentage of its total accounts receivable does Grainger feel are uncollectible? Hint: Percentage of uncollectible accounts = Allowance for uncollectible accounts/Gross accounts receivable. Round your answers to two decimal places. ($ 000s) 2009 2008 2007 Percentage of uncollectible accounts to gross accounts receivable 3.97 % 4.3 % 4.11 % (c) What amount of bad debts expense did Grainger report in its income statement for each of the years 2007 through 2009? ($ 000s) 2009 2008 2007 Bad debts expense (titled Provision for Uncollectible Accounts) $ 10,748 * $ 12,924 + $ 15,436 (d) Since 2007, did the allowance for uncollectible accounts increase or decrease as a percentage of gross accounts receivable? The allowance for uncollectible accounts remained relatively the same as a percentage of gross accounts receivable. The allowance for uncollectible accounts has decreased as a percentage of gross accounts receivable. The allowance for uncollectible accounts has increased as a percentage of gross accounts receivable. Mark 1.00 out of 1.00 The correct answer is: The allowance for uncollectible accounts has decreased as a percentage of gross accounts receivable. (e) If Grainger had kept its 2009 allowance for uncollectible accounts at the same percentage of gross accounts receivable as it was in 2007, by what amount would its profit have changed (ignore taxes)? HINT: Use rounded answer from part b to calculate. Round answer to the nearest thousands. Profit would decrease by $ 0.896 * ($ 000s) (f) Which of the following statements about Grainger's allowance for uncollectible accounts and the related bad debts expense is false? Since 2007, Grainger has decreased its allowance for uncollectible accounts as a percentage of gross receivables . Grainger's current allowance account appears adequate since it is nearly three times the level of current-year write-offs. Since 2007, Grainger's bad debt expense has decreased each year. Since 2007 Grainger has increased its write-offs each year. Mark 1.00 out of 1.00 https://mybusinesscourse mod/quiz/review.php?attempt=3391657&cmid=209986 1/2
