Assume that Nuance in number 1 above used the percentage of receivables method to estimate uncollectible
accounts instead of the percentage of sales method. Nuance assumes that 5 percent of accounts receivable will never be collected.
. Prepare the entry to record Nuance’s bad debt expense for the year.
Show how the net accounts receivable balance would be reported on the balance sheet.
Why are companies allowed to choose between methods of estimating bad debts instead of being required to use one method?