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 accounts receiv of $610,000 and allowance for doubtful accounts of $110,410. Patient Care manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of recent year, Patient Care reported accounts receivable of $948,000 and allowance for doubtful accounts of $23,700. a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for The XYZ Corporation. Round your answers to one decimal place. % b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Patient Care. Round your answers to one decimal place. % c. Possible reasons for the difference in the two ratios computed in (a) and (b) include: a. Casino operators historically lose money on operations. b. Casino operators have larger accounts receivable. c. 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. d. Casino operations experience greater bad debt risk, since it is difficult to control the creditworthiness of customers entering the casino.
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 accounts receiv of $610,000 and allowance for doubtful accounts of $110,410. Patient Care manufactures and sells a wide range of healthcare products including Band-Aids and Tylenol. As of recent year, Patient Care reported accounts receivable of $948,000 and allowance for doubtful accounts of $23,700. a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for The XYZ Corporation. Round your answers to one decimal place. % b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Patient Care. Round your answers to one decimal place. % c. Possible reasons for the difference in the two ratios computed in (a) and (b) include: a. Casino operators historically lose money on operations. b. Casino operators have larger accounts receivable. c. 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. d. Casino operations experience greater bad debt risk, since it is difficult to control the creditworthiness of customers entering the casino.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Transcribed Image Text: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 accounts receivable
of $610,000 and allowance for doubtful accounts of $110,410. 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 $948,000 and allowance for doubtful accounts of $23,700.
a. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for The XYZ Corporation. Round your answers to one decimal place.
%
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable for Patient Care. Round your answers to one decimal place.
%
c. Possible reasons for the difference in the two ratios computed in (a) and (b) include:
a. Casino operators historically lose money on operations.
b. Casino operators have larger accounts receivable.
c. 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.
d. Casino operations experience greater bad debt risk, since it is difficult to control the creditworthiness of customers entering the casino.
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