The MGM Mirage owns and operates casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of December 31, 2009, The MGM Mirage reported accounts and notes receivable of $465,580,000 and allowance for doubtful accounts of $97,106,000.
Johnson & Johnson manufactures and sells a wide range of health care products including Band-Aids and Tylenol. As of December 31, 2009, Johnson & Johnson reported accounts receivable of $9,979,000,000 and allowance for doubtful accounts of $333,000,000.
a. Compute the percentage of the allowance for doubtful accounts to the accounts and notes receivable as of December 31, 2009, for The MGM Mirage. Round to one decimal place.
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable as of December 31, 2009, for Johnson & Johnson. Round to one decimal place.
c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b).