Answer
Collection expenses. Here, either method (a) or (b) can be utilized.
On account of this organization, one strong argument for method (a) is that it is advisable to have the bad debt expense account show the full amount of expenses relating to efforts to collect and failure to collect balances receivable. On the other hand, a disagreement can be made to debit the allowance balance on the theory that bad debts (including affiliated expenses) are established at the time the allowance is first established. As a result, the allowance balance already has anticipated these expenses and therefore as they arise they should be charged against the allowance account.
Work Step by Step
It is also important to mention that there is no “correct answer” to this question. It would seem that alternatives (c) and (d) are not good alternatives because the expense is not identified with bad debts, which it should be.
