Question

ABC company had 8,000 in accounts receivable on Dec. 31, 2019. However, the company estimated that 2,000 of them would become bad debt. The company recorded the 2,000 as bad debt. What is the impact on the financial statement?

Answer 1

Answer:

Net income is reduced by 2,000 and the net value of receivables on balance sheet reduced by 2,000

Explanation:

Since it is given that there is $8,000 in account receivable out of which $2,000 would be estimated and recorded as a bad debt

So here the bad debt expense is recorded that means the expenses are increased that ultimately reduced the net income also at the same time the amount of receivable would also decreased by $2,000

Therefore the same is to be considered