Final answer:
The Correct option is 3). The least reliable method for determining the adequacy of the allowance for uncollectible accounts is subsequent year collections, as it is less predictable and can be significantly affected by factors like economic downturns.
Step-by-step explanation:
In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon subsequent year collections of amounts in accounts receivable at the balance sheet date. Factors like the credit manager's opinion, an aging schedule of past due accounts, and ratios showing the past relationship of the valuation allowance to net credit sales are typically more reliable. Subsequent year collections can vary significantly due to unexpected market conditions or economic downturns, like a recession, and therefore, are less predictable and can lead to a misleading valuation of the allowance.
For example, consider a scenario where a well-run bank, like Safe and Secure Bank, expects a small percentage of loan defaults factored into their planning. If the actual loan defaults greatly exceed expectations due to an economic crisis, the bank could experience a significant reduction in the value of its assets, which could cause its Net Worth to turn negative.