Red Shoes Ltd has gone bankrupt and will not pay $10 000 to XYZ. XYZ has accounts receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not adjust the accounts for the $10 000 that will not be paid by Red Shoes Ltd. Which of the following statements is true about the balance sheet of XYZ?

Select one:

a. total assets are overstatedb. total assets are understatedc. net accounts receivable is correctly statedd. none of the above