Wanda B$.$ Rich is the CEO of Outlet Flooring, a discount provider of carpet, tile, wood, and laminate flooring. At the end of the year, the company$$s accountant provides Wanda with the following information, before any adjustment.

Accounts receivable $$10,800,000$

Estimated percentage uncollectible $2\%$

Allowance for uncollectible accounts $ $108,000($credit$)$

Operating income $ $2,800,000$

Wanda has significant stock ownership in the company and, therefore, would like to keep the stock price high. Analysts on Wall Street expect the company to have operating income of $$2,120,000.$ The fact that actual operating income is well above this amount will make investors happy and help maintain a high stock price. Meeting analysts$$ expectations will also help Wanda keep her job.

Required:

$1.$ Record the adjusting entry for uncollectible accounts using the accountant$$s estimate of $2\%$ of accounts receivable.

$2-$a$.$ After the adjusting entry is recorded in requirement $1,$ what is the revised amount of operating income?

$2-$b$.$ Will Outlet Flooring still meet analysts$$ expectations?

$3.$ Wanda instructs the accountant to instead record $$680,000$ as bad debt expense so that operating income will exactly meet analysts$$ expectations. By how much would total assets and operating income be misstated if the accountant records this amount?

$4.$ Why would Wanda be motivated to manage operating income in this way?