The occurrence which most likely would have no effect on 2007 net income (assuming that all amounts involved are material) is the
A)sale in 2007 of an office building contributed by a stockholder in 1983.
B)collection in 2007 of a receivable from a customer whose account was written off in 2006 by a charge to the allowance account.
C)settlement based on litigation in 2007 of previously unrecognized damages from a serious accident which occurred in 2005.
D)worthlessness determined in 2007 of stock purchased on a speculative basis in 2003.

Question

Quizplus · Accepted Answer

The collection of a receivable that was previously written off does not affect net income, as it is recorded as a recovery of bad debts, which adjusts the allowance for doubtful accounts rather than impacting current year income.

The Occurrence Which Most Likely Would Have No Effect on 2007