Question
Reformulating Allowance for Doubtful Accounts and Bad Debt Expense Merck & Company reported the following from its 2016 financial statements. $ millions 2013 2014 2015
Reformulating Allowance for Doubtful Accounts and Bad Debt Expense
Merck & Company reported the following from its 2016 financial statements.
$ millions | 2013 | 2014 | 2015 | 2016 | |
---|---|---|---|---|---|
Accounts receivable, net | $7,666 | $7,105 | $6,965 | $7,499 | |
Allowance for doubtful accounts | 170 | 179 | 191 | 225 |
a. Compute accounts receivable gross for each year.
$ millions | 2013 | 2014 | 2015 | 2016 | |
---|---|---|---|---|---|
Accounts receivable, gross | $Answer
| $Answer
| $Answer
| $Answer
|
b. Determine the percentage of allowance to gross account receivables for each year.
Round answers to two decimal places (ex: 0.02345 = 2.35%).
2013 | 2014 | 2015 | 2016 | |
---|---|---|---|---|
% allowance | Answer % | Answer % | Answer % | Answer % |
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 35%.
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.
Round answers to one decimal place.
Use negative signs with answers to indicate the adjustment decreases an account.
2013 | 2014 | 2015 | 2016 | ||
---|---|---|---|---|---|
Adjusted allowance for doubtful accts. | $Answer
| $Answer
| $Answer
| $Answer
| |
Balance Sheets Adjustments | |||||
Allowance for doubtful accounts | Answer
| Answer
| Answer
| Answer
| |
Accounts receivable, net | Answer
| Answer
| Answer
| Answer
| |
Deferred tax liabilities | Answer
| Answer
| Answer
| Answer
| |
Retained Earnings | Answer
| Answer
| Answer
| Answer
| |
Income Statements Adjustments | |||||
Bad debts expense | Answer
| Answer
| Answer
| Answer
| |
Income tax expense at 35% | Answer
| Answer
| Answer
| Answer
| |
Net Income | Answer
| Answer
| Answer
| Answer
|
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