Interpreting the Accounts receivable Footnote Hewlett-Packard Company (HPQ) reports the following in its 2009 10-K report.

October 31 (in millions)	2009	2008
Accounts receivable, net	$16,537	$16,928

HPQ footnotes to its 10-K provide the following additional information relating to its allowance for doubtful accounts.

For the fiscal years ended October 31 (in millions)	2009	2008	2007
Allowance for doubtful accounts-accounts receivable
Balance, beginning of period	$ 553	$ 226	$ 220
Increase in allowance from acquisition	--	245	3
Addition of bad debts provision	282	226	32
Deductions, net of recoveries	(206)	(144)	(29)
Balance, end of period	$ 629	$ 553	$ 226

(a) What is the gross amount of accounts receivables for HPQ in fiscal 2009 and 2008?

($ millions)	2009	2008
Gross accounts receivable	Answer	Answer

(b)What is the percentage of the allowance for doubtful accounts to gross accounts receivable for 2009 and 2008? (Round your answers to two decimal places.)

($ millions)	2009	2008
Percentage of uncollectible accounts to gross accounts receivable	Answer%	Answer%

(c)What amount of bad debts expense did HPQ report each year 2007 through 2009? What amount was actually written off?

($ millions)	2009	2008	2007
Bad debt expense	$Answer	$Answer	$Answer
Amount actually written off	$Answer	$Answer	$Answer

Which of the following statements describes how bad debts expense compares with the amounts of its accounts receivable actually written off?

Generally, HP has overestimated its accruals, which has deflated profit by the over-accrual of bad debts.

Generally, HP has underestimated its accruals, which has inflated profit by the under-accrual of bad debts.

The difference between bad debt expense and write-off during the three years is insignificant so it appears that profit has been fairly stated.

The difference between bad debt expense and write-off during the three years has inflated HPQ's cash flows reported.

(d)Compute HPQ's write-offs as a percentage of the allowance account at the beginning of the year (Round your answers to two decimal places). 2009 write-offs as a percentage of beginning of year allowance: Answer% 2008 write-offs as a percentage of beginning of year allowance: Answer% What inferences can we draw as a result of changes in the allowance for doubtful accounts from 2008 to 2009?

The allowance for uncollectible accounts has decreased as a percentage of gross accounts receivable in 2009. We can , therefore, expect write-offs to increase.

HPQ's write-offs as a percentage of the allowance decreased from 2008-2009. By this measure it appears that HPQ is accurately accruing for anticipated credit losses.

The allowance for uncollectible accounts has decreased as a percentage of gross accounts receivable in 2009. This means that HPQ is over-stating its bad debt expense in the current year.

HPQ's write-offs as a percentage of the allowance decreased from 2008-2009. The reduction in write-off is reflected in their income statement as a corresponding reduction of bad debt expense and an increase in profit.