As shown in the financial statements in Appendix B of this textbook, Costco's balance sheet lists "Receivables, net" under the heading "Current Assets." This amount represents Costco's receivables after the allowance for doubtful accounts estimate has been deducted. Gross accounts receivable must be calculated. Additional information necessary for the calculation is usually included in Note No. 1, "Summary of Significant Accounting Policies."

Instructions: 

1. Using Note 1, beginning on page Appendix B-10, locate the paragraph titled "Receivables, net." This paragraph lists the allowance for doubtful account balances for September 3, 2006, and August 28, 2005. Use this information and Costco's Balance Sheet to calculate the gross accounts receivable for September 3, 2006, and August 28, 2005.

2. How have the gross receivables and the allowance for doubtful accounts changed from 2005 and 2006? What does this say about Costco's expectations for collecting its receivables?

Data from Appendix B

Data from page Appendix B-10

Transcribed Image Text:

COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value) ASSETS September 3, 2006 August 28, 2005 CURRENT ASSETS Cash and cash equivalents.. Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets PROPERTY AND EQUIPMENT $ 1,510,939 1,322,181 565,373 $ 2,062,585 1,397,272 4,568,723 529,150 4,014,699 264,866 234,295 8,232,082 8,238,001 Land... 2,747,396 2,502,247 Buildings, leasehold and land improvements 6,241,357 5,622,439 Equipment and fixtures 2,405,229 2,181,740 Construction in progress 248,454 180,604 11,642,436 10,487,030 Less accumulated depreciation and amortization (3,078,141) (2,696,838) Net property and equipment 8,564,295 7,790,192 OTHER ASSETS 698,693 637,012 $17,495,070 $16,665,205