The estimate of bad debt expense may be based on the historical relationships between actual bad debts incurred and $\begin{array}{ll}&\text { Accounts }\\&\text { Receivable}&\text {Sales }\\\hline I.&\text { Yes } & \text { No } \\II.&\text { No } & \text { No } \\III.&\text { No } & \text { Yes } \\IV.&\text { Yes } & \text { Yes }\end{array}$

A) I
B) II
C) III
D) IV

Question

The estimate of bad debt expense may be based on the historical relationships between actual bad debts incurred and

\begin{array}{ll}&\text { Accounts }\\&\text { Receivable}&\text {Sales }\\\hline I.&\text { Yes } & \text { No } \\II.&\text { No } & \text { No } \\III.&\text { No } & \text { Yes } \\IV.&\text { Yes } & \text { Yes }\end{array}

A) I
B) II
C) III
D) IV

Yesenia Mendez · Accepted Answer

Final Answer : D, Explanation :  The estimate of bad debt expense can be based on historical relationships with both accounts receivable and sales, making option IV correct. This approach allows for a more accurate estimation by considering both the amount of credit sales and the outstanding balances that might not be collected.

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