Use Amazon.com’s balance sheet and the Note 1 data on “Allowance for doubtful accounts”.

Requirements

1. Do accounts receivable appear to be an important asset for Amazon.com? What about Amazon’s business affects the importance of accounts receivable?

2. Assume that all of “Accounts receivable, Net, and Other Current Assets” is accounts receivable. Further assume that gross receivables at December 31, 2007, were \($317\) million. Answer the following questions based on these data, plus what is reported on the balance sheet.

a. How much did customers owe Amazon.com at December 31, 2007?

b. How much did Amazon.com expect to collect from customers after December 31, 2007?

c. Of the total receivable amount at December 31, 2007, how much did Amazon.com expect not to collect?

3. Compute Amazon.com’s acid-test ratio at the end of 2007. Marketable securities are short-term investments. Assume that other current assets are zero. If all the current liabilities came due immediately, could Amazon pay them?