Question: Describe the two allowance methods used to estimate the amount of bad debts expense that appears on the income statement.

Describe the two allowance methods used to estimate the amount of bad debts expense that appears on the income statement.

Step by Step Solution

★★★★★

3.34 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Bad debts expense in the allowance method can be estimated two different ways The percentage of sales method estimates the periods bad debts expense by taking a percentage of the periods net credit sales The accounts receivable method requires the company to estimate the amount of the year end balance of accounts receivable it believes will not be collected This estimate should be the year end balance in the allowance account The difference between the balance in the Allowance account prior to adjustment if positive and the estimate ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

323-B-A-C-R (2377).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Describe four methods used to estimate sales for budgeting purposes.

To estimate the amount of lumber in a tract of timber, an owner decided to count the number of trees with diameters exceeding 12 inches in randomly selected 50-by-50-foot squares. Seventy...

A bottled water distributor wants to estimate the amount of water contained in 1 gallon bottles purchased from a nationally known water bottling company. The water bottling companys specifications...

Which of the following are the two methods of accounting for uncollectible receivables? A) allowance method and direct write - off method B) allowance method and liability method C) direct write -...

Which of the following is a FALSE statement regarding Bad Debt Expense? a)we can expect that some of our customers will not pay us. b)it should be recorded only when payments are acyually in...

Great Outdoors Lid sells outdoor furniture settings on credit. The accounting records at 30 June 2019 reveal the following. Ignore GST Credit sales (for year) Credit sales returns and allowances (for...

Nebraska bookshop specializes in used, rare, and out-of-print books. The store has a large base of repeat customers who purchase books on 30-day accounts. At 15 days overdue, each customer gets a...

Option #1: Nebraska Bookshop Financial Review Nebraska bookshop specializes in used, rare, and out-of-print books. The store has a large base of repeat customers who purchase books on 30-day...

Multiple Choice Questions Use the following information for questions 14. Freds Supply Store just received its monthly bank statement from Local Street Bank. The bank gives a balance of $45,000....

Bad debts -Direct Write-off and Allowance Methods - EchoGnomics is a wholesaler of garden figurines, selling mainly to independent gardening shops in Australia. All sales are conducted on a 30-day...

Crow's Foot notation and IDEF1X notation are two other popular notations for the ER modeling grammar. Investigate these two types of grammar and compare them with the Chen's notation used in this...

Read the passage carefully and answer the questions: For fifteen years I spent almost half of every business day holding conferences, discussing problems. Should we do this or thator nothing at all?...

QUESTION 4 What is the main advantage of storing operating system backups in Amazon S 3 ? Backups can be backed up to an EC 2 instance Backups can be scheduled to occur automatically Backups can be...

______________ activities in North America have resulted in several species becoming extinct.

Which of the following costs are irrelevant to business decisions? a. sunk costs b. costs that differ between alternatives c. variable costs d. avoidable costs

When pricing a product or service, managers must consider which of the following? a. only variable costs b. only period costs c. only manufacturing costs d. all costs

When making outsourcing decisions a. the manufacturing full unit cost of making the product in-house is relevant b. the variable cost of producing the product in-house is relevant c. avoidable fixed...

Etonic Inc. is considering an investment of $371,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year...

K-Roo Ltd. wants to finance its US investments in the international debt market. It faces the following current and expected interest rates: Current annualized 90-day LIBOR: 4.2% Expected 90-day...

A company that manufactures electronic calculators uses a certain type of plastic . An alternative plastic material is introduced in the market and the manager of the company is thinking of shifting...