Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please show work Exercise (Estimating Credit Card Payoff and Default) Suppose Walmart Credit Card has two aging categories for its accounts receivable: 1. accounts that
please show work
Exercise (Estimating Credit Card Payoff and Default) Suppose Walmart Credit Card has two aging categories for its accounts receivable: 1. accounts that are 0-30 days old, and 2. accounts that are 31-90 days old. If any portion of an account receivable balance is over 90 days, that portion is written off as bad debt. An analysis of accounting records leads to the following accounts receivable matrix (P): Paid Bad Debt 0-30 Days 31-90 Days Paid 1.0 0.0 0.0 0.0 Bad Debt 0.0 1.0 0.0 0.0 0.6 0.0 0.3 0.1 0-30 Days 31-90 Days 0.4 0.2 0.3 0.1 Predict the percentages of the 0-30 day accounts that will eventually end up in the paid off and the bad debt (written off) categories? What about those percentages for the 31-90 day accounts? In other words, for each of these two accounts receivable categories, what are the percentages of money (outstanding balance) that will be deemed collectible and uncollectible in the future? Mathematically, we are calculating the NR matrix here. Also estimate the allowance for doubtful accounts if Walmart has a total of $1000M accounts receivable balance in the 0-30 day category and $2000M balance in the 31-90 day category as of this time. In other words, what is the outstanding balance Walmart should expect to get paid back in the future? And what is the default amount Walmart should expect to write off in the future? Mathematically, we are calculating the BNR vector hereStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started