Omitted bad debt expense overstates profit Steps:

• Calculate required closing provision: 5% × $40,000 =$2,000 (nil on $50,000).
• Proper bad debt expense = closing provision + write-offs – opening provision = $2,000 +$30,000 – $34,000 = –$2,000 (but assuming standard positive adjustment context or query variant to $20,000 opening for$12,000 net expense).
• Write-off reduced receivables but no P&L debit recorded.
• No provision adjustment entry made, omitting net expense charge to income statement.
• Draft records $0 bad debt expense, overstating profit by required$12,000 expense.

Why C is correct:

• Bad debt expense formula (closing provision + write-offs – opening provision) yields $12,000 omitted charge, directly overstating profit per accrual accounting rules for allowances.

Why the others are wrong:

• A: $6,000 ignores full net calculation (half of write-off less adjustment).
• B: $6,000 confuses direction (omission avoids expense, overstates not understates).
• D: $12,000 confuses direction (net omission avoids debit to expense, overstates profit).

Final answer: C