Question
At the end of Year 5, your consulting firm has been hired by a local service firm to help forecast future uncollectible accounts. You ask
At the end of Year 5, your consulting firm has been hired by a local service firm to help forecast future uncollectible accounts. You ask the service firm to provide several years of data on the percentage of uncollectible accounts based on the age categories of accounts receivable at the beginning of the year. With these historical percentages, you estimate a trend line (dashed line) to predict the percentage of uncollectible accounts for Year 6, the upcoming year. Graphs were provided to management from your analysis of each of the three age categories, as well as balances of accounts receivable by age category at the end of Year 5 as follows:
Click here to open the graph(s) in a new tab. Required: 1. Which age category predicts the lowest percentage of uncollectible accounts for Year 6? 2. Which age category predicts the highest percentage of uncollectible accounts for Year 6? 3. Calculate the total amount of estimated uncollectible accounts for Year 6 (Hint: Use all three age categories)? 4. Determine the amount of net accounts receivable the company would report at the end of Year 5.
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