nterpreting 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)	2005	2004	2003
Cash and cash equivalents	$ 544,894	$ 429,246	$ 402,824
Accounts receivable (less allowances for doubtful accounts of $18,401, $23,375 and $24,736, respectively	518,625	480,893	431,896
Inventories, net	791,212	700,559	661,247
Prepaid expenses and other assets	54,334	47,086	37,947
Deferred income taxes	88,803	96,929	99,499
Prepaid income taxes	--	--	--
Total current assets	$ 1,997,868	$ 1,754,713	$ 1,633,413

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 December 31 ($ 000s)	2005	2004	2003
Allowance for doubtful accounts- accounts receivable
Balance at beginning of period	$ 23,375	$ 24,736	$ 26,868
Provision for uncollectable accounts	1,326	5,159	9,263
Write-off of uncollectible accounts, less recoveries	(6,380)	(6,662)	(11,713)
Foreign currency exchange impact	80	142	318
Balance at end of period	$ 18,401	$ 23,375	$ 24,736

(a) What amount do customers owe Grainger at each of the year-ends 2003 through 2005?

($ 000s)	2005	2004	2003
Gross accounts receivable	$Answer	$Answer	$Answer

(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)	2005	2004	2003
Percentage of uncollectible accounts to gross accounts receivable	Answer %	Answer %	Answer %

(c) What amount of bad debts expense did Grainger report in its income statement for each of the years 2003 through 2005?

($ 000s)	2005	2004	2003
Bad debts expense (titled Provision for Uncollectible Accounts)	$Answer	$Answer	$Answer

(d) Since 2003, 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.

1.00 points out of 1.00

(e) If Grainger had kept its 2005 allowance for uncollectible accounts at the same percentage of gross accounts receivable as it was in 2003, 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 Answerincreasedecrease

by $Answer

($ 000s) (f) Which of the following statements about Grainger's allowance for uncollectible accounts and the related bad debts expense is false?

Since 2003, Grainger has decreased its allowance for uncollectible accounts as a percentage of gross receivables.

Since 2003 Grainger has decreased it allowance for uncollectible accounts by decreasing its write-offs.

Grainger's current allowance account appears adequate since it is nearly three times the level of current-year write-offs.

Since 2003, Grainger has decreased its bad debts expense.