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 | $7,189 | $6,631 | $6,489 | $7,019 | |
Allowance for doubtful accounts | 149 | 156 | 168 | 199 |
a. Compute accounts receivable gross for each year.
$ millions | 2013 | 2014 | 2015 | 2016 | |
---|---|---|---|---|---|
Accounts receivable, gross |
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 |
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.
-
Use rounded answer above for computations, then 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. | |||||
Balance Sheets Adjustments | |||||
Allowance for doubtful accounts | |||||
Accounts receivable, net | |||||
Deferred tax liabilities | |||||
Retained Earnings | |||||
Income Statements Adjustments | |||||
Bad debts expense | |||||
Income tax expense at 35% | |||||
Net Income |
Please answer all parts of the question.
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