The percent of sales method for estimating bad debts assumes that a given percentage of a company's credit sales for the period are uncollectible.

Question

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The percent of sales method for estimating bad debts is based on the assumption that a certain percentage of a company's credit sales will eventually go bad (i.e. be uncollectible). This percentage, which is often based on historical data and industry standards, is multiplied by the total credit sales for the period to arrive at an estimate of the bad debt expense for that period.

The Percent of Sales Method for Estimating Bad Debts Assumes