If a company uses the percent of receivables method to estimate uncollectible accounts,the company will first determine the required ending balance in Allowance for Doubtful Accounts,and Uncollectible Accounts Expense will be the difference between that amount and the current balance in the allowance.

Question

Quizplus · Accepted Answer

This is correct. The percent of receivables method involves estimating the percentage of total receivables that will be uncollectible and using that percentage to calculate the required ending balance in the allowance for doubtful accounts. Uncollectible accounts expense is then calculated as the difference between the required ending balance and the current balance in the allowance.

If a Company Uses the Percent of Receivables Method to Estimate