How many of the following would decrease net income in the current year? a. Estimating future uncollectible accounts receivable b. Estimating future warranty costs c. Estimating future selling price of inventory to be below its original cost d. Estimating future cash flows of a long-term asset to be below its book value e. Paying cash for research and development costs in the current year A) 1 B) 2 C) 3 D) 4 E) 5 Solution How many of the following would decrease net income in the current year? Answer: (b) Estimating future warranty costs. & (e)Â Â Paying cash for research and development costs in the current year Note1: Estimating future uncollectible accounts receivable is shown in asset side of the financial report.It is short term asset. So, it has no effect on reducing the net profit. Note2: Estimating future warranty costs is the provision for the current year. It is expected future liability for the company. So, it is cause of reducing net profit during current year. Note3: Estimating future selling price of inventory to be below its original cost is not effect the net profit. It is because inventory is shown in financial report as cost of inventory or selling price whichever is lower. Note4: Estimating future cash flows of a long-term asset to be below its book value is not effect the net profit in the current year.It is because,Long-term asset is shown on book value. Future expected cash flow is not shown in the current period. Note5: Paying cash for research and development costs in the current year is reducing the current net profit. It is because research and development cost is expensed off in the year on which it occured. .