While reviewing the books of Edberg Pest Control Service you discover that no adjusting entry was made for estimated bad debts traceable to sales in 2012 the company's first year of operation).Assuming this error is not corrected which of the following is true at year-end 2012?

Question

Quizplus · Accepted Answer

Without adjusting for estimated bad debts, accounts receivable (an asset) is overstated because it includes amounts that are unlikely to be collected. Consequently, profit is also overstated because bad debt expense, which reduces profit, has not been recorded.

While Reviewing the Books of Edberg Pest Control Service You