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    Anth Company has significant amounts of trade accounts recei

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    Anth Company has significant amounts of trade accounts receivable. Anth
    uses the allowance method to estimate bad debts instead of the specific
    write-off method. During the year, some specific accounts were written off
    as uncollectible, and some that were previously written off as uncollectible
    were collected.
    Anth also has some interest-bearing notes receivable for which the face
    amount plus interest at the prevailing rate of interest is due at maturity. The
    notes were received on July 1, 2004, and are due on June 30, 2006.
    Required:
    b. What are the two basic allowance methods used to estimate bad debts,
    and what is the theoretical justification for each?

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    Solution Preview

    Uncollectible accounts
    Anth Company has significant amounts of trade accounts receivable. Anth uses the allowance method to estimate bad debts instead of the specific write-off method. During the year, some specific accounts were written off as uncollectible, and some that were previously written off as uncollectible were collected.
    Anth also has some interest-bearing notes ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what are the two basic allowance methods used to estimate bad debts, and what is the theoretical justification for each.

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