A company that uses the allowance method to account for uncollectible accounts Records Bad Debt Expense when a receivable is written off. Does not record uncollectible accounts until the amount becomes significant. Reports the net realizable value of its accounts receivable on the balance sheet. None of these answer choices are correct.

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Business

Austin Boone

18 February, 05:45

A company that uses the allowance method to account for uncollectible accounts Records Bad Debt Expense when a receivable is written off. Does not record uncollectible accounts until the amount becomes significant. Reports the net realizable value of its accounts receivable on the balance sheet. None of these answer choices are correct.

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Nicolas Branch · Answer 1

The correct answer is Reports the net realizable value of its accounts receivable on the balance sheet.

Explanation:

The main methods of estimating bad debts use historical information on accounts receivable and provisions to make the estimate.

A percentage of sales or the balance of the accounts receivable period at the end of the year can be used as a basis for estimating the recording of bad accounts.

The estimate is credited to the reserve or provision account, which reduces the receivables, marking the difference between the gross receivables and the net receivables.

The result of doubtful debts is debited with a debit corresponding to doubtful debt charges, which will be recorded in whole or in part in the income statement.