# Which of the following estimation methods considers the amount of time past due when computing bad debt? A. balance sheet method B. direct write-off method C. income statement method D. balance sheet aging of receivables method

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 10MC
Textbook Problem
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## Which of the following estimation methods considers the amount of time past due when computing bad debt?A. balance sheet methodB. direct write-off methodC. income statement methodD. balance sheet aging of receivables method

To determine

Concept introduction:

Allowance method:

Under the Allowance method the estimated bad debts expenses are recorded using the Allowance for doubtful account and the actual bad debts written off using this account. Allowance for doubtful accounts represents the amount of expected bad debts or uncollectable accounts. This account is made as a provision for future bad debts.

Direct write off method:

Under the Direct write off method the actual bad debts are directly written of using the accounts receivable account.

Aging of receivable method:

Bad debts expense can be recognized with several methods. Aging of receivable method is one of those methods. In this method the receivables are categorized into different categories according to the age and percentage of uncollectible is determined for each age and bad debts are calculated using these percentages.

Percent of sales method:

Bad debts expense can be recognized with several methods. Percent of sales is one of those methods. Under this method the bad debts expense is calculated as a percentage of sales.

To choose:

The method that considers the bad debts due in past.

### Explanation of Solution

Balance sheet aging of receivable method considers the amount of time passed due to compute the bad debts. Hence the correct option is D.

A. Balance sheet method does not segregate the receivable according to their age or due time...

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