Answer:
c.The result is based on either a percentage of sales or an analysis of receivables
Explanation:
Generally, companies will choose between two approaches under the allowance method.
Percentage of Sales: Using historical data, a company examines the relationship between sales and uncollectible accounts receivable. If there is a fairly stable relationship between the two, a company will use the historical Uncollectible Accounts / Credit Sales ratio to estimate the bad debts expense in the current period.
This method is sometimes referred to as the income statement approach.
Percentage of Accounts Receivable: Using historical data, a company examines the relationship between accounts receivable and uncollectible accounts. Companies will oftentimes increase the accuracy of these estimates by looking at their aging schedule for patterns, rather than using a composite (or total) of their receivables
This method is sometimes referred to as the balance sheet approach
