Company Q is in its first year of operations and has decided to use the percentage of accounts receivable method for estimating uncollectible accounts. The ending accounts receivable balance was $96,000. Company Q estimates an allowance of 10% of ending accounts receivable. Assume that Company Qs accountant recorded write-offs for the period of $2,000 and $9,600 of bad debt expense. What is the effect of this transaction?

a. Net income is overstated by 2,000

b. Bad debt expense is overstated by 2,000

c. Cost of Goods sold is understated by 2,000

d. None of the these