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Nature of uncollectible accounts MGM Resorts International owns and operates hotels and casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of a recent year, MGM reported accounts receivable of $570,348,000 and allowance for doubtful accounts of $89,789,000. Johnson& Johnson manufactures and sells a wide range of health care products including BandAid ® bandages and Tylenol ® . As of a recent year, Johnson & Johnson reported accounts receivable of $11,002,000,000 and allowance for doubtful accounts of $268,000,000. a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for MGM Resorts International. Round to one decimal place. b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Johnson & Johnson. Round to one decimal place. c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b).

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 9, Problem 9.2EX
Textbook Problem

Nature of uncollectible accounts

MGM Resorts International owns and operates hotels and casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of a recent year, MGM reported accounts receivable of $570,348,000 and allowance for doubtful accounts of $89,789,000. Johnson& Johnson manufactures and sells a wide range of health care products including BandAid® bandages and Tylenol®. As of a recent year, Johnson & Johnson reported accounts receivable of $11,002,000,000 and allowance for doubtful accounts of $268,000,000.

  1. a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for MGM Resorts International. Round to one decimal place.
  2. b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Johnson & Johnson. Round to one decimal place.
  3. c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b).

Expert Solution

(a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

To compute: The percentage of allowance for doubtful accounts to the accounts receivable for MGM Resorts.

Explanation of Solution

Compute the percentage of allowance for doubtful accounts to the accounts receivable for MGM Resorts.

Percentage of allowance fordoubtful accounts to the accountsreceivable for MGM Resorts}=Allowance for doubtful accounts

Expert Solution

(b)

To determine

To compute: The percentage of allowance for doubtful accounts to the accounts receivable for J & J manufactures.

Expert Solution

(c)

To determine

To discuss: The possible reasons for the difference in percentage of allowance for doubtful accounts to the accounts receivable between MGM Resorts and J & J manufactures.

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Chapter 9 Solutions

Accounting
Show all chapter solutions
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