Question

On December 31, Year 1, Kardashian Company recorded an adjusting entry to recognize $5,470 of uncollectible accounts expense. Which of the following shows how this entry will affect Kardashian's financial statements?

Answer 1

When Kardashian Company records an adjusting entry to recognize $5,470 of uncollectible accounts expense, it will affect the financial statements by reducing net income and reducing the accounts receivable balance.

Step-by-step explanation:

When Kardashian Company records an adjusting entry to recognize $5,470 of uncollectible accounts expense on December 31, Year 1, it will affect the financial statements as follows:

• Income Statement: The expense of $5,470 will be recognized as bad debt expense, which will reduce net income.
• Balance Sheet: The accounts receivable balance will be reduced by $5,470, reflecting the uncollectible amount.