Task: Interpreting 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) 2007 2006 2005
Cash and cash equivalents $ 113,437 $ 348,471 $ 544,894
Marketable securities at cost, which approximate market value 20,074 12,827 --
Accounts receivable (less allowances for
doubtful accounts of $25,830, $18,801
and $18,401, respectively) 602,650 566,607 518,625
Inventories, net 946,327 827,254 791,212
Prepaid expenses and other assets 61,666 58,804 54,334
Deferred income taxes 56,663 48,123 76,474
Prepaid income taxes --
Total current assets $ 1,800,817 $ 1,862,086 $ 1,985,539
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) 2007 2006 2005
Allowance for doubtful accounts- accounts receivable
Balance at beginning of period $ 18,801 $ 18,401 $ 23,375
Provision for uncollectable accounts 15,436 6,057 1,326
Write-off of uncollectible accounts, less recoveries (8,755) (5,660) (6,380)
Foreign currency exchange impact 348 3 80
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Balance at end of period $ 25,830 $ 18,801 $ 18,401
(a) What amount do customers owe Grainger at each of the year-ends 2005 through 2007?
($ 000s) 2007 2006 2005
Gross accounts receivable
(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) 2007 2006 2005
Percentage of uncollectible accounts to gross accounts receivable
(c) What amount of bad debts expense did Grainger report in its income statement for each of the years 2005 through 2007?
($ 000s) 2007 2006 2005
Bad debts expense (titled Provision for Uncollectible Accounts)
Land, Building and Equipment, Net
(in millions) 2007 2006
Land $ 146 $ 142
Buildings and improvements 2,000 1,900
Machinery and equipment 6,250 5,850
Capitalized interest 352 340
Construction in progress 271 218
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Land, Building and Equipment, Gross 9,019 8,450
Less: Accumulated depreciation 5,908 5,481
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Total $ 3,111 $ 2,969
(b) Evett and Sternard reported depreciation expense of $412 million in 2007. Estimate the useful life, on average, for its depreciable PPE assets. (Round your answer to two decimal places.)
(c) By what percentage are Evett and Sternard's assets "used up" at year-end 2007? (Round your answer to two decimal places.)