Espana Van Conversions had credit sales of $2,000,000 during Year 1. On 12/31/Year 1, the balance in Accounts Receivable was $81,000. The company estimates bad debts to equal 1% of credit sales. What effect will the company's 12/31 adjusting entry have on the company's income statement and balance sheet? (Please provide an explanaton of the answer) a. Decrease income by $20,000; no effect on balance sheet b. Decrease income by $20,000; decrease assets by $20,000 c. No effect on either income statement or balance sheet d. None of the above.

Espana Van Conversions had credit sales of $2,000,000 during Year 1. On 12/31/Year 1, the balance in Accounts Receivable was $81,000. The company estimates bad debts to equal 1% of credit sales. What effect will the company's 12/31 adjusting entry have on the company's income statement and balance sheet? (Please provide an explanaton of the answer) a. Decrease income by $20,000; no effect on balance sheet b. Decrease income by $20,000; decrease assets by $20,000 c. No effect on either income statement or balance sheet d. None of the above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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