The Following Aging Information Pertains to Jacobsen Co During 2018, Jacobsen Wrote Off $18,000 in Receivables and Recovered

question 174

Multiple Choice

The following aging information pertains to Jacobsen Co.'s accounts receivable at December 31, 2018: $\begin{array}{crr}&&\text { Estimated \% }\\\text { Days Outstanding }&\text { Amount }&\text { Uncollectible }\\\hline0-30 & \$ 420,000 & 2 \% \\ 31-60 & 140,000 & 5 \% \\61-120 & 100,000 & 10 \% \\\text { Over } 120 & 120,000 & 20 \%\end{array}$ During 2018, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2017, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2018?

• A) $55,400.
• B) $28,000.
• C) $49,400.
• D) $31,400.

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Definitions:

Annual Rate

The annual rate refers to the interest or return on an investment over a one-year period, expressed as a percentage of the investment's initial value.

Speculative Bubble

A situation in financial markets where asset prices are driven by exuberant market behavior, greatly exceeding the asset's intrinsic value.

Fundamental Value

Fundamental value is the intrinsic worth of an asset, determined through financial analysis of its underlying factors including earnings, dividends, and growth prospects.

Risk-Return Tradeoff

The principle that potential return on investment increases with an increase in risk.