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1.An increase in an allowance for receivables of $8000 has been treated as a reduction in the allowance in the financial statements. Which of the following explains the resulting effects?
A.Net profit is overstated by $16,000, receivables overstated by $8, 000
B.Net profit understated by $16, 000, receivables understated by $16,000
C.Net profit overstated by $16, 000, receivables overstated by $16, 000
D. Gross profit overstated by $16,000, receivables overstated by $16,000
(2 marks)