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 companys accountant provides Wanda with the following information, before any adjustment.

Accounts Receivable	11,000,000
Estimated Percentage Uncollectible	4%
Allowance for Uncollectible Accounts	110000
Operating Income	2,900,000

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 $2,200,000. 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.

1. Record the adjusting entry for uncollectible accounts using the accountants estimate of 4% of accounts receivable.

2. After the adjustment is recorded in Part 1, what is the revised amount of operating income?

3. Wanda instructs the accountant to instead record $700,000 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?

Total Assets	Understated By:	?
Operating Income	Understated By:	?