Question

Nebraska bookshop specializes in used, rare, and out-of-printbooks. The store has a large base of repeat customers who purchasebooks on 30-day accounts. At 15 days overdue, each customer gets aphone call from Nebraska requesting payment. Nebraska hasexperienced a high success rate with this collection effort.Nebraska’s CPA is preparing year-end financial statements, and thecompany has asked him for his estimate of uncollectible accounts.Nebraska has a balance of $65,000 in the accounts receivableaccount at the end of the year. The CPA has analyzed the company’suncollectible accounts using an aging of the accounts receivable.He estimates that only 2.5% of his accounts receivable balance willnot be collected. The allowance for doubtful accounts has a creditbalance of $210 in the trial balance.

Indicate three or four measures Nebraska can implement tominimize his write-offs and explain why investors would beconcerned about write-offs.

 

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