a-company-has-credit-sales-of-20000-in-year-1-and-writes-off-2000-in-year-2-how-

Question

A company has credit sales of $20,000 in Year 1 and writes off $2,000 in Year 2. How should this be reflected in the financial statements?

Accepted Answer

Revenue is overstated in Year 1, and bad debt expense is understated in Year 1.

Answer

Bad debt expense is overstated in Year 2.

Answer

Revenue is understated in Year 2.

Answer

Revenue and bad debt expense are correctly stated in Year 1.

A company has credit sales of \$20,000 in Year 1 and writes off \$2,000 in Year 2. How should this be reflected in the financial statements?