This case raises the question: How does a company reasonably estimate and record entries for uncollectible trade receivables, and under what circumstances are receivables written off as uncollectible? The required accounting transactions for the case involve estimating a receivables allowance both as a percentage of sales and as a percentage of accounts receivable and making specific account judgments under the direct write?off method. The subjective issues involve analyzing and assessing a company's methods of collection and accounting for bad debts.
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