Question

By the end of 2022, Humanity International has the benefit of hindsight to know that estimates of uncollectible accounts in 2021 were too high. How did this overestimation affect the reported amounts of total assets and expenses at the end of 2021

Answer 1

Humanity International

The overestimation of the uncollectible accounts in 2021 reduced the reported amount of total assets and increased the total amount of expenses at the end of 2021.

Step-by-step explanation:

When the uncollectible accounts in 2021 were overestimated, the uncollectible expense for the year was also overestimated. This increased the total amount of expenses for that year. In turn, the total amount of assets was decreased since the uncollectible allowance is usually deducted from an element of the assets (Accounts Receivable).