Answer
1.The percentage of receivables should be used when setting up allowances relating to bad debts. This approach upholds a high level of accuracy when projecting the likely realizable value of accounts receivable.
2.
The fees associated with the collection of bad debts ought to be categorized as bad debts expense; this is the most ideal account for such expenses that is in line with the expense recognition principle. Thus, the amount of bad debts recovered can be easily matched with these specific expenses.
3. Crediting the recoveries made by Clarke Pierce to the Allowance for Doubtful Accounts is the apt move. This method would ensure that the write-offs conducted previously are reinstated to the accounts receivable account. Subsequently, normal journal entries relating to the reduction of accounts receivables would be made.
Work Step by Step
1.The percentage of receivables should be used when setting up allowances relating to bad debts. This approach upholds a high level of accuracy when projecting the likely realizable value of accounts receivable.
2.
The fees associated with the collection of bad debts ought to be categorized as bad debts expense; this is the most ideal account for such expenses that is in line with the expense recognition principle. Thus, the amount of bad debts recovered can be easily matched with these specific expenses.
3. Crediting the recoveries made by Clarke Pierce to the Allowance for Doubtful Accounts is the apt move. This method would ensure that the write-offs conducted previously are reinstated to the accounts receivable account. Subsequently, normal journal entries relating to the reduction of accounts receivables would be made.
