A.
Allowance method:
It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method,
To compute: The percentage of allowance for doubtful accounts to the
B.
To compute: The percentage of allowance for doubtful accounts to the accounts receivable for J & J manufactures.
C.
To discuss: The possible reasons for the difference in percentage of allowance for doubtful accounts to the accounts receivable between MGM Resorts and J & J manufactures.
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Chapter 8 Solutions
Corporate Financial Accounting
- Consider the following information from Alliance Data Systems Corporation 2009 10K.On October 30, 2009, the Company assumed the operations of the Charming Shoppes’ credit card program, including the service center operations associated with Charming Shoppes’ branded card progams, portfolio and securitization master trust. The transaction consisted of purchasing existing accounts and the rights to new accounts along with certain other assets that are required to support the securitization program including retained certificates and interests, cash collateral accounts, and an interest-only strip, totaling a combined $158.9 million. The Company obtained control of the assets and assumed the liabilities on October 30, 2009, the acquisition date. The reults of operations for this acquisition have been included since the date of acquisition and are reflected in the Private Label Services and Private Label Credit segments.The Company engaged a third-party specialist to assist it in the…arrow_forwardThe following are relevant information pertaining to the results of the business operations for Maisarah Islamic Window for the year 2020: Income from Operations2600000Expenses from Operations1180000Indirect Income (Fee Based)300000Indirect Expenses260000The above profit from operation is prior to the distribution of profit to mudharabah depositors. The agreed profit sharing ratio between the Bank and mudharabah depositors is 60:40 respectively.Required:Assuming that the Separate Investment Account Method SIAM is used, calculate the net profit/loss to the Islamic Bank (Before Tax and Zakat)arrow_forwardThe following are relevant information pertaining to the results of the business operations for Maisarah Islamic Window for the year 2020: Income from Operations 3600000 Expenses from Operations 1300000 Indirect Income (Fee Based) 200000 Indirect Expenses 360000 The above profit from operation is prior to the distribution of profit to mudharabah depositors. The agreed profit sharing ratio between the Bank and mudharabah depositors is 60:40 respectively. Required Assuming that the pooling Method is used, calculate the net profit/loss to the Islamic Bank (Before Tax and Zakat)arrow_forward
- Revenue Recognition Policy Decisions. For each of these situations, describe the revenue recognition policy that you believe that the company should follow. An international health club sells lifetime memberships costing $1,500 which allow the purchaser unlim-ited use of any of the club’s 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the customer sells the vehicle, whichever occurs first.…arrow_forwardConsider the following independent situations: For each of these situations, describe the revenue recognition policy that you believe that they should follow, explaining the basis for your recommendation 1. An international health club sells lifetime memberships costing $1,500 which allow the purchaser unlimited use of any of the club's 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance. 2. Franklin Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a $1,500 payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the…arrow_forwardModern Movables Corporation is a Virginia-based manufacturer of furniture. In a recent quarter, it reported the following activities: $ 4,235 881 Net income Purchase of equipment Borrowings under line of credit (bank) Proceeds from issuance of common stock 1,427 12 Cash received from customers 29,264 Payments to reduce notes payable (long-term) Sale of investments 47 135 Proceeds from sale of equipment Dividends paid Interest paid 6,694 278 91 Required: Based on this information, present the cash flows from investing and financing activities sections of the cash flow statement. (Amounts to be deducted should be indicated with a minus sign.) MODERN MOVABLES CORPORATION Statement of Cash Flows (Partial) Cash Flows from Investing Activities: Cash Flows from Financing Activities:arrow_forward
- Concord Corp. follows IFRS and sells its products in expensive, reusable containers that can be tracked. The customer is charged a deposit for each container that is delivered and receives a refund for each container that is returned within two years after the year of delivery. When a container is not returned within the time limit, Concord accounts for the container as being sold at the deposit amount and credits the account Container Sales Revenue. Information for 2023 is as follows: Containers held by customers at December 31, 2022, from deliveries in: Containers delivered in 2023 Containers returned in 2023 from deliveries in: Liability for Reusable Containers $ eTextbook and Media List of Accounts 2021 2022 There would be 2021 $118,000 2022 291,300 315,000 $177,200 418,700 2023 Calculate the total amount that Riverbed should report as a liability for returnable deposits at December 31, 2023. Had Riverbed followed ASPE, would any of your answers in above parts be different?…arrow_forwardCrane Biotech enters into a licensing agreement with Windsor Pharmaceutical for a drug under development. Crane will receive a payment of $8,600,000 if the drug receives regulatory approval. Based on prior experience in the drug-approval process, Crane determines it is 85% likely that the drug will gain approval and a 15% chance of denial. (a) Determine the transaction price of the arrangement for Crane Biotech. Transaction price $ eTextbook and Media List of Accounts Save for Later Attempts: 0 of 3 used Submit Answer (b) The parts of this question must be completed in order. This part will be available when you complete the part above.arrow_forwardanswer in text form please (without image), Note: .Every entry should have narration pleasearrow_forward
- Domesticarrow_forwardAirport Accessories (AA) has several loans outstanding with a local bank. The loan contract contains an agreement that AA must maintain a current ratio of at least 0.90. Micah, the assistant controller, estimates that the year-end current assets and current liabilities will be $2,100,000 and $2,400,000, respectively. These estimates provide a current ratio of only 0.875. Violation of the debt agreement will increase AA’s borrowing costs because the loans will be renegotiated at higher interest rates.Micah proposes that AA purchase inventory of $600,000 on credit before year-end. This will cause both current assets and current liabilities to increase by the same amount, but the current ratio will increase to 0.90. The extra $600,000 in inventory will be used over the next year. However, the purchase will cause warehousing costs and financing costs to increase. Micah is concerned about the ethics of his proposal. What do you think?arrow_forwardEagle Corp. operates Magnetic Resonance Imaging (MRI) clinics throughout the Northeast. At the end of the current period, the company reports the following amounts: Assets = $42,000; Liabilities = $23,000; Dividends = $2,200; Revenues = $12,400; Expenses = $8,200. What is net income?arrow_forward
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