Shupe Inc.estimates uncollectible accounts based on the percentage of accounts receivable.What effect will recording the estimate of uncollectible accounts have on the accounting equation?

Question

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Recording the estimate of uncollectible accounts will decrease the amount of assets (accounts receivable) and will also decrease stockholders' equity through the recognition of an expense (bad debt expense) on the income statement. Therefore, the accounting equation will be decreased on both sides, resulting in a decrease in assets and stockholders' equity.

Shupe IncEstimates Uncollectible Accounts Based on the Percentage of Accounts Receivable