NOTE 5: ALLOWANCE FOR LOAN LOSSES

question 177

Essay

NOTE 5: ALLOWANCE FOR LOAN LOSSES

The allowance for loan loss is maintained at a level to absorb probable losses inherent in the loan portfolio. This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off, and reduced by charge-offs on loans.

The following is a summary of the changes in the allowances for loan losses for three years:

Winchester also reported (in thousands) in its comparative balance sheet that it held Loans receivable, net, of $6,869,11 and $6,819,209 at December 31, 2018, and December 31, 2017, respectively.
-If Winchester is using the balance sheet approach to determining loan losses and the Allowance account balance, what percentage did it use in 2018?

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Definitions:

Summated Ratings

A method of scoring a questionnaire by adding up the total of all the responses to get a combined measure of an attitude or trait.

Quantitative

Pertaining to data or research that can be measured and expressed numerically.

Guttman's Scale

A scale designed for attitude measurement, where items are arranged in a single dimension that reflects increasing levels of intensity.

Thurstone's Method

A psychometric technique for measuring attitudes that involves the use of a scaling method for ranking items along a continuum.