Application of the percentage of receivables method-The percentage of receivables method handles this process a bit differently. Assume that theYear Two adjusting entry has not yet been made so that bad debt expense remains at zero and theallowance for doubtful accounts still holds a $3,000 debit balance. However, the company has chosen touse the percentage of receivables method rather than the percentage of sales method. Officials havelooked at all available evidence and come to the conclusion that 15 percent of ending accounts receivable($160,000 ×15 percent or $24,000) is most likely to prove to be uncollectible.How does application of the percentage of receivables method affect the recording of doubtful accounts?
