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eformulating Allowance for Doubtful Accounts MGM International operates casinos and resorts across the U . S . and in China. The company reported the following
eformulating Allowance for Doubtful Accounts
MGM International operates casinos and resorts across the US and in China. The company reported the following in its SEC filings.
We maintain an allowance for doubtful casino accounts at all of our operating casino resorts. The provision for doubtful accounts, an operating expense, increases the allowance for doubtful accounts. We regularly evaluate the allowance for doubtful casino accounts. At domestic resorts where marker play is not significant, the allowance is generally established by applying standard reserve percentages to aged account balances. At domestic resorts where marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectability of each account with a balance over the specified dollar amount, based on the age of the account, the customers financial condition, collection history and any other known information. MGM China specifically analyzes the collectability of casino receivables on an individual basis taking into account the age of the account, the financial condition and the collection history of the gaming promoter or casino customer.
Schedule II Valuation and Qualifying Accounts
Balance at Provision Writeoffs, Balance
Allowance for doubtful accounts Beginning for Doubtful Net of at end of
In Thousands of Period Accounts Recoveries Period
Year ended December $ $ $ $
Year ended December
Year ended December
Year ended December
MGM reported the following on its balance sheets.
$ thousands
Accounts receivable, net $ $ $ $
a Analyze the allowance account for each of the four years by computing the ratio of the allowance to gross accounts receivable.
Note: Round the percentage to two decimal places for example, enter for
Allowance Accounts receivable, gross Answer
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b Reformulate the income statement and balance sheet accounts listed below for all four years to reflect the fouryear average of the allowance to gross accounts receivable. Assume that the tax rate is for all four years. Follow the process in Analyst Adjustments ; income statement first, followed by balance sheet.
Note: Do not round until your final answers; round your final answers to the nearest whole dollar.
Adjustments to income statement accounts:
$ thousands
Bad debts expense Answer
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Income tax expense Answer
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Net income Answer
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Adjustments to balance sheet accounts:
$ thousands
Allowance for doubtful accounts Answer
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Accounts receivable, net Answer
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Deferred tax liabilities Answer
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Retained earnings Answer
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c Ignoring the analysis in part b assume that we anticipate that the coronavirus pandemic of will shrink gambling activities worldwide. This will impair existing accounts receivable. For each of the balance sheet and income statement accounts listed below indicate what adjustments would be required under the assumption that the allowance to gross receivables ratio will increase to of total gross receivables.
Note: Do not round until your final answers; round your final answers to the nearest whole dollar.
$ thousands Increase, Decrease, or No Change
Bad debts expense Answer
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Increase
Income tax expense Answer
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Decrease
Net income Answer
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Decrease
Allowance for doubtful accounts Answer
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Increase
Accounts receivable, net Answer
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Decrease
Deferred tax liabilities Answer
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Increase
Retained earnings Answer
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Decrease
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