Joe's Auto Repair estimates that approximately 3% of net credit sales are uncollectible. Joe's calculates Bad Debts Expense using the:
A) direct write-off method.
B) income statement method.
C) gross method.
D) balance sheet method.

Question

Quizplus · Accepted Answer

The income statement method, also known as the percentage of sales method, estimates bad debts based on a percentage of net credit sales, which is exactly what Joe's Auto Repair is doing by estimating that approximately 3% of net credit sales are uncollectible.

Joe's Auto Repair Estimates That Approximately 3% of Net Credit