Under the Allowance Method of accounting for uncollectible accounts,a firm should base their estimate of uncollectible accounts on all of the following EXCEPT:
A) net credit sales for the year
B) total current assets as of the end of the year
C) total accounts receivable at the end of the year
D) aging of accounts receivable at the end of the year

Question

Quizplus · Accepted Answer

The estimate of uncollectible accounts under the Allowance Method should not be based on total current assets as it is not directly related to the collectibility of accounts receivable. The other options, net credit sales for the year, total accounts receivable at the end of the year and aging of accounts receivable at the end of the year are all pertinent factors to consider when estimating uncollectible accounts.

Under the Allowance Method of Accounting for Uncollectible Accounts,a Firm