Indicate the effects of the following errors on each of the items listed in the column headings below. Use the following symbols: O = overstated, U = understated, and NE = no effect. Assume that the company does not use the direct write-off method to account for uncollectible accounts.
a. Recorded uncollectible accounts expense by debiting Sales and crediting Accounts Receivable.
b. Wrote off an account receivable deemed uncollectible by debiting Uncollectible Accounts Expense and crediting Accounts Receivable.
c. Collected cash from credit customers in settlement of outstanding accounts receivable by debiting Cash and crediting Sales.
• Gross Profit = Sales – Cost of Goods Sold
• Current Ratio = Current Assets � Current Liabilities
• Receivables Turnover Rate = Sales � Average Accounts Receivable (net)
• Working Capital = Current Assets – Current Liabilities