Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 44

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 $592,937,000 and allowance for doubtful accounts of $101,207,000 Johnson Johnson manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of a recent year, Johnson Johnson reported accounts receivable of $11,775,000,000 and allowance for doubtful accounts of $466,000,000.
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).