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Financial Accounting

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Allowance Method: What Procedures Needed?

FINACT-N1Q$BO

For estimating bad debt expense, companies can use the sales method or the receivables method. If a company uses the receivables method, what are they required to do under Generally Accepted Accounting Principles (GAAP)?

A

Record Bad Debt Expense as a percent of sales and increase the Allowance for Uncollectible Accounts by this amount.

B

Record Bad Debt Expense when account write-offs occur.

C

Reduce the Accounts Receivable general ledger by expected uncollectible accounts.

D

Determine the appropriate ending balance in the Allowance for Uncollectible Accounts.