FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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am.104.

Merck & Company reported the following in its financial statements.
$ millions
Accounts receivable, net
Allowance for doubtful accounts
2016 2017 2018 2019
$8,773 $8,591 $8,839 $8,473
244
199 149 108
Adjust the balance sheet and income statement to reflect a 1.97874% of Allowance for doubtful accounts to Gross accounts receivables for each year. Assume a tax rate of 20%.
• Round answers to one decimal.
• Use a negative sign to indicate if the adjustment decreases an account balance.
2016
2017
2018
2019
Adjusted allowance for doubtful accts. $
178.4 $
173.9 $
177.8 $
169.8
Income Statement Adjustments
Bad debts expense
Income tax expense at 20%
Net Income
(65.6)
(25.1)
28.8
61.8
(13.1)
(5)
5.8
12.4
52.5
20.1
(23.1)
(49.4)
Balance Sheet Adjustments
Allowance for doubtful accounts
(65.6)
(90.6)
(61.8)
0
Accounts receivable, net
65.6
90.6
61.8
0
Deferred tax liabilities
13.1
18.1
12.4
0
Retained Earnings
52.5
72.5
49.4
0
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Transcribed Image Text:Merck & Company reported the following in its financial statements. $ millions Accounts receivable, net Allowance for doubtful accounts 2016 2017 2018 2019 $8,773 $8,591 $8,839 $8,473 244 199 149 108 Adjust the balance sheet and income statement to reflect a 1.97874% of Allowance for doubtful accounts to Gross accounts receivables for each year. Assume a tax rate of 20%. • Round answers to one decimal. • Use a negative sign to indicate if the adjustment decreases an account balance. 2016 2017 2018 2019 Adjusted allowance for doubtful accts. $ 178.4 $ 173.9 $ 177.8 $ 169.8 Income Statement Adjustments Bad debts expense Income tax expense at 20% Net Income (65.6) (25.1) 28.8 61.8 (13.1) (5) 5.8 12.4 52.5 20.1 (23.1) (49.4) Balance Sheet Adjustments Allowance for doubtful accounts (65.6) (90.6) (61.8) 0 Accounts receivable, net 65.6 90.6 61.8 0 Deferred tax liabilities 13.1 18.1 12.4 0 Retained Earnings 52.5 72.5 49.4 0
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