Business Case Studies & Business Publications

Aillen Harmonies: Updating the Approach ...

Naughton, James

Case

Aillen Harmonies: Updating the Approach to Bad Debt Expense

Naughton, James

C-2468 | Published July 22, 2024 | 3 Pages Case

Collection: Darden School of Business

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Learning Objectives

This short case introduces and compares the two most common methods for determining bad debt expense: the percent-of-sales method and the aging method. Not only are students introduced to the mechanics, but the case is designed to allow for a discussion of when each method is most appropriate. At the University of Virginia Darden School of Business, this case is used in the first-year Core Financial Accounting course. It would also be suitable in courses covering intermediate financial accounting topics.

- Understand how managerial estimates flow through financial statements, with a particular focus on how uncollectible accounts are managed. - Understand the difference between the percent-of-sales method and the aging method for managing the allowance for uncollectible accounts. - Build a framework for understanding the different approaches managers have at their disposal for creating estimates, and for understanding how differences between estimates and actual outcomes flow through the financial statements.