FARE Q&S Sim. p.294 Sim. 14-16
3. In year 2, the company reviewed its accounts receivable and determined that $26,000 of accounts receivable that had been carried for years appeared unlikely to be collected.
My question) To account for the uncollectible A/R, why did you record $26,000 debit to Loss (FARE sim-7 lecture)? The book's answer also looks like $26,000 is subtracted from income from continuing operations before taxes of $1,210,000 (no explanation in the book).
My opinion) When we determine that A/R is uncollectible, the general entry should be
Allowance for doubtful accounts $26,000
Since there are no effects on I/S, we do not have to adjust income from continuing operations before taxes of $1,210,000 for this additional transaction.