If the estimate of uncollectible accounts at the end of the current year is too high,which of the following is true in the following year?

Question

Quizplus · Accepted Answer

When the estimate of uncollectible accounts is too high, it means that the company has overestimated the amount of accounts receivable that it will not be able to collect. This does not directly affect cash collections from customers, as those are based on actual payments received, not on estimates of uncollectibility. However, it does mean that the balance in the Allowance for Uncollectible Accounts (a contra-asset account to Accounts Receivable) will be higher than necessary, resulting in a credit balance before any adjustments in the following year. Additionally, if the allowance is too high at the beginning of the year, the amount needed to adjust it to the correct ending balance might be less, potentially resulting in a lower Bad Debt Expense than the ending balance of the Allowance for Uncollectible Accounts after adjustment. Therefore, all the other answers are true in the context of the scenario provided.

If the Estimate of Uncollectible Accounts at the End of the Current