The percentage-of-sales procedure arises from the idea that uncollectible amounts will vary with the volume of credit business.The firm estimates the appropriate percentage by studying its own experience or by inquiring into the experience of similar firms.Default rates generally fall within the range of .01% to .02% of credit sales.

Question

Quizplus · Accepted Answer

The statement is incorrect. The default rates generally fall within the range of 1% to 2% of credit sales, not .01% to .02%.

The Percentage-Of-Sales Procedure Arises from the Idea That Uncollectible Amounts