Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the companys accounting manager provides Willie with the following information, before any adjustment.

Accounts receivable	$ 1,040,000
Estimated percentage uncollectible	9%
Allowance for uncollectible accounts	$ 34,000	(credit)
Operating income	$ 254,000

Willies compensation contract states that if the company generates operating income of at least $204,000, he will get a salary bonus early next year.

Required:

1. Record the adjusting entry for uncollectible accounts using the accountants estimate of 9% 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 Willie get his salary bonus?

3. Willie instructs the accountant to record the adjusting entry for uncollectible accounts using 6% rather than 9% of accounts receivable. Now will Willie get his salary bonus?

4. By how much would total assets and operating income be misstated using the 6% amount?

In particular 2b - question 4