The challenge businesses face when estimating the allowance for previously recorded sales is that:
A) at the time of the sale, it is not known which particular customer will be a "bad" customer
B) past default rates are not a good predictor of future default rates
C) in bad economic times, fewer customers will have problems with their payments
D) those sales have been closed into retained earnings

Question

Quizplus · Accepted Answer

The challenge businesses face when estimating the allowance for previously recorded sales is that at the time of the sale, it is not known which particular customer will be a "bad" customer. This uncertainty makes it difficult to accurately estimate the amount of allowance needed for potentially uncollectible accounts.

The Challenge Businesses Face When Estimating the Allowance for Previously