Aging Accounts Receivable Denver Company sells products primarily to small hardware supply companies.

At December 31, 2001, the total accounts receivable balance for Denver Company was $750,000 and an allowance for uncollectibles of $27,000 was on its books. An analysis of accounts receivable at December 31, 2001, disclosed the following:

a. If the estimated percentages are correct, is the allowance for uncollectibles for Denver Company appropriate?
What adjustment, if any, should be made to the allowance?

b. Assume that the management of Denver Company has concluded that the amount of uncollectibles is too high.
What actions might be taken to reduce the amount of uncollectibles? What additional effects might these actions have?

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Receivable Amount Number of Days Outstanding Estimated Percent That Will Be Collected $400,000 Less than 20 98% 200,000 21-40 days 95 120,000 41-60 days 90 30,000 More than 60 222 70