When a Company Extends Credit to Its Customers, the Company

question 85

Essay

When a company extends credit to its customers, the company realizes it will not likely collect all of the related accounts receivable. As some accounts may prove to be uncollectible, a company must estimate its bad debt expense.
Required:
a.What is the purpose of estimating bad debt expense?
b.There are two relationships that can be used to estimate the bad debt expense for a company. Describe the two major relationships that can be used to estimate bad debts expense and the financial statement orientation of each.

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Definitions:

Disruptive Behaviors

Actions that interrupt or negatively impact the normal flow of activities in a social or educational setting.

Teachers

Educators responsible for facilitating learning, providing academic instruction, and fostering social and personal development.

Cognitive Theorist

A psychologist or researcher who studies the mental processes involved in knowing, including aspects like perception, thinking, memory, and judgment.

Mental Representation

The mental imagery of things that are not currently seen or sensed by the sense organs; in other words, the ability of the mind to hold, process, or project images and ideas internally.