It is only option <em>D. − = n/a − n/a + − n/a</em> that reflects the effect of the year-end adjusting entry for Uncollectible Accounts Expense when the allowance method is used.
The entry reduces Accounts Receivable (Assets) through its contra account (the Allowance for Uncollectible Accounts).
It does not affect the liabilities. It reduces Equity because it is an expense that reduces Retained Earnings.
The entry does not affect the Revenue but increases Expenses, which reduce the Net Income.
It is not a cash flow item and does not affect the Statement of Cash Flows.
Data and Options:
Balance Sheet Income Statement Statement of
Cash Flows
Assets = Liabilities + Stockholders' Equity Revenue Expense = Net Income
A. − = n/a − n/a − − − OA
B. n/a = − − n/a + − n/a
C. n/a = − − n/a + − − OA
D. − = n/a − n/a + − n/a
The estimated <em>Uncollectible Accounts Expense</em> is Bad Debt Expense.
When this year-end adjusting entry is recorded, the financial statements affected are only the Income Statement (expenses) and the Balance Sheet (equity).
Thus, the only correct reflection of the adjustment is option D.
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