Assume the Hart Company uses the allowance method.When the company writes off a customer's account balance that has no chance of collection:
A) total assets will decrease.
B) total liabilities will increase.
C) expenses and revenues will both increase.
D) total assets will decrease and expenses will increase.

Question

Quizplus · Accepted Answer

When the company writes off a customer's account balance, the accounts receivable and the allowance for doubtful accounts decrease. This decreases the total assets of the company. Additionally, the bad debt expense increases, which represents an increase in expenses. Therefore, the correct answer is D.

Assume the Hart Company Uses the Allowance Method