A Credit Company Has Gathered Information Regarding the Average Amount

question 52

Short Answer

A credit company has gathered information regarding the average amount owed by people under 30 years old and by people over 30 years. Independent random samples were taken from both age groups. You are given the following information. Construct a 95% confidence interval for the difference between the average amounts owed by the two age groups.

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Definitions:

Uncollectible Accounts

Accounts receivable that a company has determined it will not be able to collect due to customer default.

Direct Write-off

A method of accounting for bad debts where uncollectible accounts receivable are directly written off against income at the time they are deemed uncollectible.

Bad Debts Recovered

When an account receivable has been written off and is recovered, this account, which is in the Other Revenue category, is credited in the direct write-off method if the recovery is in a year following the write-off.

Allowance for Doubtful Accounts

A contra asset account that estimates the portion of receivables that may not be collectible, affecting a company’s net income and assets.