1

John Jones calculates that this year's estimated bad debts expense will be $13 800. When John makes the adjusting entry, the effect will be: Group of answer choices

Bad debt expense: Increase; Allowance for doubtful debts: No effect; Gross accounts receivable: Decrease.

Bad debt expense: Increase; Allowance for doubtful debts: Increase; Gross accounts receivable: No effect. Bad debt expense: No effect; Allowance for doubtful debts: Increase; Gross accounts receivable: Decrease. Bad debt expense: No effect; Allowance for doubtful debts: Decrease; Gross accounts receivable: No effect.

2

While reviewing the books of Simon's Pest Control Service you discover that no adjusting entry was made for estimated bad debts traceable to sales in 2022 (the company's first year of operation). Assuming this error is not corrected, which of the following is true at year-end 2022? Group of answer choices

Assets are correct, profit is overstated

Assets are understated, profit is overstated

Assets are correct, profit is overstated

Liabilities are overstated, profit is understated