WK2, DQ3 - methods of calculating the allowance for...

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Why would you use the percentage of sales method for calculating doubtful accounts as opposed to the percentage of receivables method? The percentage of sales method better matches expenses with revenues (best for the income statement). An instance when an organization would want to use the percentage of receivables method is if the organization’s collection experience has improved, and expected lower defaults (best for the balance sheet). Is it appropriate to use a hybrid of the percentage of sales and the percentage of receivables
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Unformatted text preview: methods of calculating the allowance for doubtful accounts? Explain why or why not. It is not appropriate for an organization to use the hybrid of the percentage of sales and the percentage of A/R methods because it goes against GAAP. Does GAAP allow for the use of both methods at the same time? Explain why or why not. GAAP allows for one method to be used. ..if a change in methods is made, it must be disclosed....
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This note was uploaded on 08/15/2010 for the course ACCT Acc281 taught by Professor Tontis during the Spring '10 term at DeVry Long Beach.

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