Question

Myrtle Beach Pro-Shop receives information that requires the company to increase its expectations of uncollectible accounts receivable. Which of the following does not occur on the company’s financial statements?a. Bad debt expense is increasedb. Accounts receivables (gross) is reducedc. Net income is reducedd. The allowance account is increasede. None of the above

Answer 1

Answer:

b. Accounts receivables (gross) is reduced

Explanation:

As we know that

The journal entry to record the bad debt expense is  

Bad debt expense A/c Dr

  To Allowance for doubtful debts

(Being allowance of uncollectible accounts are recorded)

By passing this journal entry, both bad debt expense and the allowance for doubtful debts which result in a decrease in the net income and the balance of account receivable but the gross of account receivable would remain the same.