On October 12 of the current year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Assuming the allowance method is used to account for bad debts,what effect will this write-off have on the company's net income and total assets?
A)Decrease in net income; no effect on total assets.
B)No effect on net income; no effect on total assets.
C)Decrease in net income; decrease in total assets.
D)Increase in net income; no effect on total assets.
E)No effect on net income; decrease in total assets.

Question

Quizplus · Accepted Answer

Writing off an account receivable under the allowance method does not affect net income because the expense was recognized earlier when the allowance was created. It also does not affect total assets because the write-off reduces both accounts receivable and the allowance for doubtful accounts by the same amount.

On October 12 of the Current Year,a Company Determined That