Now if we look at the final totals, we've already received $20 cash and
recorded $20 of pre-tax income.
The accounts receivable has been zeroed out because of the 30
we originally booked when we made sales.
We collected twenty in cash and then we wrote off ten as un-collectable.
If you look at the allowance, it started at ten because we
didn't know who was going to pay us but we thought somebody would.
Then when we found out it was Dakota, we didn't need the allowance anymore so
we reduced it by ten to zero it out.
We have 30 of revenue, 10 of bad debt expense.
That's a net of 20 of pre-tax income.
And note that when all is said and done,
the $20 of pre-tax income equals the cash that we actually collected.