Asked by Shibuya Daemon on Jul 16, 2024
Verified
The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:
A) The percent of sales method.
B) The percent of accounts receivable method.
C) The aging of accounts receivable method.
D) Direct write-off method.
E) Factoring method.
Percent of Sales Method
A financial forecasting approach that estimates future financial statements' items as a percentage of projected sales.
Allowance Method
An accounting technique that estimates and accounts for bad debts as an expense before they are actually confirmed as uncollectible.
- Implement the percent of sales method to estimate bad debts expense.
Verified Answer
LM
LeeAnn MarunaJul 20, 2024
Final Answer :
A
Explanation :
The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is called the percent of sales method. This method estimates the total amount of uncollectible accounts based on the historical ratio of bad debts to credit sales.
Learning Objectives
- Implement the percent of sales method to estimate bad debts expense.
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