Question

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 $562,947,000 and allowance for doubtful accounts of $89,602,000. Johnson & Johnson manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of a recent year, J&J reported accounts receivable of $11,260,000,000 and allowance for doubtful accounts of $275,000,000.
a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for MGM. Round your answer to one decimal place.

2.4
%
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Johnson & Johnson. Round your answer to one decimal place.

%
c. Possible reasons for the difference in the tw

Answer 1

a)

The percentage of the allowance for doubtful accounts to the accounts receivable for MGM is:

Percentage (Company MGM) = (Allowance for doubtful account)/(Account receivable)

b)

The percentage of the allowance for doubtful accounts to the accounts receivable for Johnson & Johnson is:

Percentage (Company Johnson & Johnson) = (Allowance for doubtful account)/(Account receivable)

c)

The resort company operates casinos,which result in greater bad debt.This is indicated by the higher percentage of the allowance foe doubtful accounts to the accounts receivable for the resort company.

However,the healthcare company has customers that are mostly other businesses,such as grocery stores

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