Etalumos Inc. makes sales of its products and services and extends credit to its customers. Base terms are 2/15, n30 (2% discount if paid within 15 days or the net is due within 30 days). The credit is unsecured and the potential exposure is equal to the ending 2019 Accounts Receivable balance. Default probability is calculated by taking a rolling 4-year average of the write-off percentage (write-offs/ending Accounts Receivable). The recovery percentage used is 45%.

Accounts Receivable Write-offs

2015 $1,425,000 $30,000

2016 1,545,985 32,987

2017 1,298,113 29,458

2018 1,681,557 33,451

2019 1,900,254 35,877