The percentage-of-sales method directly estimates the appropriate balance of the Allowance for Uncollectible Accounts.

Question

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The percentage-of-sales method estimates the amount of bad debt expense to record in the current period by applying a percentage to the amount of credit sales. It does not directly estimate the balance of the Allowance for Uncollectible Accounts, as other factors such as the balance of the allowance at the beginning of the period and collections during the period also impact the ending balance.

The Percentage-Of-Sales Method Directly Estimates the Appropriate Balance of the Allowance