Final answer:
Under the allowance method, companies must estimate the uncollectible amounts in the current year and report those estimates in the financial statements of the same year, which reflects the application of the matching principle. The correct answer is option b. current; current.
Step-by-step explanation:
The question pertains to the accounting process of accounting for uncollectible accounts receivable, which is a concept covered in the principles of accounting. The specific method being referred to is the allowance method, which is a technique used by companies to account for and estimate potential credit losses. Under the allowance method, companies make an educated guess about which accounts are likely to be uncollectible and report these estimated losses in the financial statements of the current period.
This method is an application of the matching principle, which dictates that expenses should be recorded in the same accounting period as the revenues they helped generate, regardless of when the cash transfer actually occurs. Hence, even though the actual losses from uncollectibles may occur in the future, the estimates and corresponding accounting entries are made in the current period, to reflect the possible losses related to the revenues of that period.
Therefore, the correct answer to the student's question is: "Under the allowance method, companies estimate current uncollectible amounts and report those estimates in the current year." In short, the answer is option b. current; current.