When would you consider a customer debt an uncollectible receivable?

• A. When the customer requests an extension for payment.
• B. When the company has a high cash balance.
• C. When there is evidence that the customer is unable to pay, such as bankruptcy or prolonged default.
• D. When the receivable is less than 30 days past due.

Answer: (C)

Verified step by step guidance

1. Understand the concept of uncollectible receivables: These are amounts owed by customers that a company determines are unlikely to be collected due to specific circumstances.
2. Identify the key indicators of uncollectible receivables: These include evidence such as bankruptcy, prolonged default, or other financial difficulties faced by the customer.
3. Evaluate the customer's payment history and financial condition: Look for signs like repeated missed payments, communication about financial hardship, or legal filings indicating insolvency.
4. Consider the age of the receivable: While receivables less than 30 days past due are generally not considered uncollectible, prolonged overdue periods may signal potential uncollectibility.
5. Understand that a high company cash balance or a customer requesting an extension for payment does not necessarily indicate uncollectibility. Focus on evidence of inability to pay, such as bankruptcy or prolonged default.