FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Nature of Uncollectible Accounts
The XYZ Corporation owns and operates hotels and casinos including the XYZ Grand and the Bellagio in Las Vegas, Nevada. As of a recent year, XYZ reported
Patient Care manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of a recent year, Patient Care reported accounts receivable of $929,000 and allowance for doubtful accounts of $35,302.
Round your answers to one decimal place.
a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for The XYZ Corporation.
fill in the blank 1 %
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Patient Care.
fill in the blank 2 %
c. Possible reasons for the difference in the two ratios computed in (a) and (b) include:
- Casino operators historically lose money on operations.
- Casino operators have larger accounts receivable.
- Individuals who may have adequate creditworthiness could overextend themselves and lose more than they can afford if they get caught up in the excitement of gambling.
- Casino operations experience greater
bad debt risk, since it is difficult to control the creditworthiness of customers entering the casino.
c and d
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