Management must periodically assess the reasonableness of the allowance for uncollectibles if it uses the
A)direct write-off method.
B)percent of sales method only.
C)percent of gross receivables method only.
D)percent of sales or the percent of gross receivables methoD.

Question

Quizplus · Accepted Answer

If management is using either the percent of sales or percent of gross receivables method to estimate the allowance for uncollectibles, it must periodically assess the reasonableness of the allowance. Both of these methods estimate the allowance based on historical data or current economic conditions, so management should regularly review these estimates to ensure they are still reasonable. The direct write-off method does not use an allowance for uncollectibles and therefore does not require periodic assessment.

Management Must Periodically Assess the Reasonableness of the Allowance for Uncollectibles