Review the Consolidated Balance Sheets (page 41) and Note 1 – Significant Accoun

Question

Review the Consolidated Balance Sheets (page 41) and Note 1 – Significant Accounting Policies, Accounts receivable and allowance for doubtful accounts (page 45). Does Sherwin-Williams believe its customer credit quality is improving or deteriorating from 2014 through 2016? Explain

Consolidated Balance Sheets December 31 Current assets: Cash and cash equivalents . . .. .. . Accounts receivable, less allowance-. Inventories: $ 889,793 S 205,744 $40,732 1,130,565 1,230,9871,114,275 Finished goods .. Work in process and raw 898,627 840,603 177,927 191,743 1,033,527 109,087 251,655 3,627,298 2,657,180 2,565,566 87,883 230,748 Other current assets 381,030 Total current assets 1,126,8921,143,333 255,010 Deferred pension assets Other assets Property, plant and equipment: 244,882 119,530 696,202 125,691 2,153,437 2,026,617 ,952,037 117,126 3,100,9332,923,431 2,005,045 1,881,569 1,814,230 1,095,888 ,041,862 1,021,030 Total Assets . Liabilities and Shareholders' Equity Current liabilities: $6,752,521 5,778,937 5,699,333 Short-term borrowin S 40,739 1,034,608 39,462 679,436 57,561 1,042,182 338,256 Accrued taxes Current portion of long-term debt... Other accruals 578,547 522,280 Total current liabilities 2,829,1792,141,859 2,680,666 1,115,996 277,892 1,211,326 Postretirement benefits other than pensions . .. . . . 248,523 Shareholders' equity Common stock $1.00 par value 93,013,031, 92,246,525, and 94,704,173 shares outstanding at December 31, 2016, 2015 and 2014, respectively 115,761 114,525 2,330,426 2,079,639 4,049,497 3,228,876 2,424,674 (4,235,832) 4,220,058) 3,150,410) Retained earnings Treasury stock, at cost .. Cumulative other comprehensive loss Total shareholders' equity Total Liabilities and Shareholders' Equity. . 1,878,441 867,910 996,470 $6,752,521 5,778,937 $5,699,333 See notes to consoidated financial staternents.

Explanation / Answer

Assuming sales had increased over the period from 2014 to 2016, which justify the increase in Account receivables ending balances over the period. Decrease in allowance for doubtful accounts from $53,770 in 2014 to $49,420 in 2015 and $40,450 in 2016 indicates improvisation in credit monitoring. Probably, this is due to fewer volume transactions or cash/advance transactions with lower credit rating customers leading to steep decrease in allowances. Therefore, Sherwin-Williams is right that its customer credit quality is improving.

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