The estimate of bad debt expense may be based on the historical relationships between actual bad debts incurred and $\begin{array}{ll}&\text { Accounts }\&\text { Receivable}&\text {Sales }\
\hline I.&\text { Yes } & \text { No } \
II.&\text { No } & \text { No } \
III.&\text { No } & \text { Yes } \
IV.&\text { Yes } & \text { Yes }
\end{array}$

Question

Quizplus · Accepted Answer

The estimate of bad debt expense can be based on historical relationships with both accounts receivable and sales, making option IV correct. This approach allows for a more accurate estimation by considering both the amount of credit sales and the outstanding balances that might not be collected.

The Estimate of Bad Debt Expense May Be Based on the Historical