Q1. AF310 Intermediate Accounting Homework 6 Questi A/R and Allowance for Doubtfal Accounts We discussed in class how Microsoft used the bad debt estimates to manage mings After Microsoft was under the investigation of SEC and later settled in 2002 Mich disclosed the amounts of allowance for doubthd sccounts very clearly on balance sheets a signal that they were clean (ie, nothing to hide any more). Let's practice some financial mely using the allowance for doubtful accounts genvided by Micro Use the 2022 Form 10-K of Microsoft Corporation posted on Blackhoed to aver the following questions. For the numbers of the year 2020, use the fing information taken from 2021 10-K of Microsoft. 2021 Accounts receivable, net of allowance for doubtful accounts of $751 and $788 0.043 2022 32.011 Total assis 3379301311 Instructions: A Calculate the grogg accounts receivable, the ending balance of allowance for deb accounts (ADA), and the percentage of the ADA city balance in the gross accounts receivable for the fiscal years 2022, 2021, and 2020, aising Microsoft estimates bad debts using one composite percentage of receivables method B. What can you say about the changes (ie, increase or decrease) in the one composite rate applied from the year 2020 to year 2022? What explanations would management at Microsoft provide for the changes in the one composite etes? Do you agree or disagree with the decision by the management at Microsoft? C. Calculate the ratio of the ADA ending balance to the total assets for 2002, 2021, and 2020 What can you say about the magnitude of ADA balances to the total asset? Are they material (Le., significant) enough for investors to pay attention D. Calculate the ratio of the ADA ending balance to the weighted average shares outstanding (basic) for 2022, 2021, and 2020. This ratio can tell us about the maximum effect on the (basic) earnings per share, if all ADA balances are expensed to net income as bad debts Compare the ratios with the reported (basic) earnings per share. Are they material (ie. significant) enough for investors to pay attention? (02 on the next page)