A Company Is Using the Percentage-Of- Credit- Sales Method to Estimate

question 2

Multiple Choice

A company is using the percentage-of- credit- sales method to estimate their bad debts and has noticed that over the past few years there has been a build-up of a debit balance in the Allowance for uncollectible accounts.Which of the following is a possible cause?

• A)Management might be trying to "manage the numbers".
• B)Management have been consistently overestimating the bad debt expense.
• C)The company has not written off enough accounts.
• D)The company has been selling more items on credit.

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Definitions:

Recessions

Periods of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in two successive quarters.

Recoveries

denotes the periods following recessions during which economic activity starts to increase and recover towards previous levels.

Discouraged Workers

Individuals who are not actively seeking work because they believe no jobs are available for them or there are none for which they would qualify.

Unemployed

Refers to individuals who are without a job but are actively seeking work.