Use the information below to answer the following question(s):Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.Increase = I Decrease = D No Effect = NAOn December 31, Year 1, Sparkes Co. estimated it had $12,000 of uncollectible accounts related to credit sales it made during the year. Sparkes, which uses the allowance method, made the necessary adjusting entry to record this estimate.
What will be an ideal response?
(D) (NA) (D) (NA) (I) (D) (NA)
Recognizing uncollectible accounts expense decreases assets (because it increases the allowance for doubtful accounts, a contra asset account) and stockholders' equity (retained earnings). It increases expenses (uncollectible accounts expense), which decreases net income. It does not affect the statement of cash flows.
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