MGM Resorts International (MGM) 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 $707,278,000 and allowance for doubtful accounts of $94,561,000. Johnson & Johnson (JNJ) 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 $14,707,000,000 and allowance for doubtful accounts of $226,000,000.
a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for MGM. Round to one decimal place.
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for J&J. Round to one decimal place.
c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b).