According to the company’s 2016 annual financial statements, Finning International Inc. is “the world’s largest Caterpillar equipment dealer.” The company is headquartered in Vancouver, but has operations in Western Canada, South America, and the United Kingdom and Ireland. The following information is taken from Note 7 of the financial statements in Finning’s 2016 financial statements:

The movement in the allowance for doubtful accounts in respect of trade receivables during the year was as follows:

Allowance for Doubtful Accounts
The Company records allowance for doubtful accounts that represent management’s best estimate of potential losses in respect of trade and other receivables and service work in progress. The main components of these allowances are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that may have been incurred but not yet specifically identified. The collective loss allowance is estimated based on historical data of payment statistics for similar financial assets, adjusted for current economic conditions.

Required

a. Based on the above information, what is the trend of the collectibility of the company’s receivables? Did the amount of accounts being written off increase in 2016?

b. Calculate the percentage the allowance represents of each of the receivables in each age grouping in 2016. Have these percentages changed from 2015? What do these percentages tell you about Finning’s receivables after they are more than 120 days overdue?

c. Based on the above information, what was Finning’s bad debts expense for 2016?

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December 31 2015 2016 |($ millions) Allowance Allowance Gross Gross $635 Not past due Past due 1- 30 days Past due 31 - 90 days Past due 91 - 120 days $528 $- 134 109 43 53 11 15 10 2 Past due greater than 120 days 32 25 23 20 Total $834 $37 $748 $23 For years ended December 31 ($ millions) Balance, beginning of year Additional allowance Receivables written off Foreign exchange translation adjustment 2016 2015 $23 $23 33 11 (19) (14) 3 Balance, end of year $23 $37