1) Your company estimates bad debt expense as a percentage of Accounts Receivable that will be uncollectible, which comes to $18,000 for the current year. The Allowance for Doubtful Accounts has a credit balance of $15,000. If no adjusting entry is recorded at year end, how will the financial statements be affected?

a) net income will be understated; assets will be understated

b) the financial statements will not be affected

c) net income will be overstated; assets will be understated

d)net income will be understated; assets will be overstated

e) net income will be overstated; assets will be overstated

2)This year, your company estimates that $18,000 of A/R will be uncollectible. The Allowance for Doubtful Accounts has a debit balance of $5,000. If no adjusting journal entry is recorded, how will the financial statements be affected?

a) financial statements will not be affected

b) net income will be overstated; assets will be overstated

c) net income will be understated; assets will be understated

d) net income will be overstated; assets will be understated

e) net income will be understated; assets will be overstated