Q1. On the income statement, overestimating bad debt expense will result in (understating / having no affect on / _____________) operating expenses and (_____________ / having no affect on / overstating) net income.
Q2. On the balance sheet, overestimating bad debt expense will result in (understating / having no affect on / _____________) the allowance for bad debts and (_____________ / having no affect on / overstating) accounts receivable, net.
Q3. To qualify for the bank loan, the manager should (over / _____________) estimate bad debt expense. Why?
Q4. Is intentionally misstating an estimate ethical? (Yes / _______ / Maybe) Why?
Q5. Is intentionally misstating an estimate legal? (Yes / ________ / Maybe) Why?
Q6. List some possible consequences if bank officials detect the misstatement of the estimate.
Q7. Discuss some ways the misstatement of bad debt expense could be detected by bank officials.
Q8. In general, unethical decisions make the (_____________ / long term) appear better, but may result in huge (short-term / _____________) costs.