Paul, the CEO of Letni, notices that accounts written off over the past three years have been minimal and, therefore, suggests that no allowance for uncollectible accounts be established in the current year. Any account proving
uncollectible can be charged to next year's financial statements (the direct write-off method).
2. Suppose that other companies in these industries have had similar increasing trends in accounts receivable aging. These company’s also had very successful collections in the past but now estimate i collectible accounts to be 15% because of the significant downturn in the industries. If Letni uses the allowance method estimated at 15% of accounts receivable, what should be the balance of Allowance for Uncollectible Accounts at the end of the current year?