on the basis of past experience, Scotiabank Canada estimates uncollectable loan at 2% of total loan...
on the basis of past experience, Scotiabank Canada estimates uncollectable loan at 2% of total loan balances outstanding if at the end of December the loans account shows the balance of 387756231 how much should Scotiabank Canada have in reserve for uncollectable loans at the end of December
Homework Answers
Solution:
Calculation of amount of reserve Scotiabank Canada has to maintain for uncollectable loans at the end of December; according to the information available:
Scotiabank Canada should maintain reserve equals to the amount of uncollectable loans, hence we have to estimate uncollectable loan amount i.e. 2% of total loan balances outstanding at the end of December.
Total Loan account balance = $ 387,756,231
Estimated uncollectable loans = 2% of total loan balance
Uncollectable loans amount = $ 387,756,231 x 2% = $ 77,55,125
Hence, reserve for uncollectable loans at the end of December will be of $ 77,55,125.
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