=+7. Does Amazon.com use the direct write-off or allowance method of accounting for uncol¬

lectible accounts receivable? Explain.

For several years, sales have been on a “cash only” basis. On January 1, 2005, however, Litespeed Co. began offering credit on terms of n/30. The amount ofthe adjusting entry to record the estimated uncollectible receivables at the end of each year has been lA of 1% of credit sales, which is the rate reported as the average for the industry. Credit sales and the year-end credit balances in Allowance for Doubtful Accounts for the past four years are as follows:

Year Credit Sales