Final answer:
The recognition of a $5,470 uncollectible accounts expense will decrease Kardashian Company's assets and equity on the balance sheet by the same amount, increase expenses on the income statement, and have no direct effect on the statement of cash flows.
Step-by-step explanation:
When Kardashian Company records an adjusting entry of $5,470 to recognize uncollectible accounts expense, it will affect the financial statements as follows: The balance sheet will show a decrease in assets, specifically accounts receivable, and an increase in the contra asset account for allowance for doubtful accounts. This results in no change in liabilities (NA). Equity will decrease by the amount of the expense due to the decrease in retained earnings, and therefore, the balance sheet equation will show a decrease in assets equal to the decrease in equity.
The income statement will report an increase in expenses, reducing the net income by $5,470. Lastly, the statement of cash flows will not be directly affected by the adjusting entry because it is a non-cash transaction. This is typically reflected in the operating activities section when adjustments are made to reconcile net income to cash provided by operating activities.
Therefore, the correct answer showing how the entry will affect Kardashian's financial statements is:
- Balance Sheet: Assets decrease by $5,470 (no change in liabilities), and Equity decreases by $5,470.
- Income Statement: Expenses increased by $5,470, resulting in a decrease in Net Income by $5,470.
- Statement of Cash Flows: No direct effect ($5,470 is a non-cash adjustment).
Based on the options provided, the correct representation would be Option A: (5,470) = NA + (5,470), NA − 5,470 = (5,470), NA.