Final answer:
The least reliable method to determine the adequacy of an allowance for uncollectible accounts is relying on C. subsequent year collections, as it reflects post-balance sheet events.
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. This approach is considered less reliable because it is based on events that occur after the balance sheet date, and thus does not necessarily reflect the conditions at the time when the allowance needs to be assessed. Instead, more focus should be placed on the credit manager's opinion, aging schedule of accounts, and historical ratios that reflect the past relationship of the valuation allowance to net credit sales. These methods provide insights based on past and current information that are predictive of potential future losses from uncollectible accounts.
A well-run bank factors in the risk of loan defaults into its planning, by including a certain percentage as an expense in anticipation that some loans will not be repaid. The value of a bank's loans on its balance sheet reflects this riskiness. However, if the actual number of loan defaults is significantly greater than expected, like during a recession, the bank's financial position can deteriorate, potentially leading to a negative net worth.