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On January 1,2016,Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500,respectively.During the year Kincaid reported $72,500 of credit sales.Kincaid wrote off $550 of receivables as uncollectible in 2016.Cash collections of receivables amounted to $74,550.Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.
-Kincaid's entry required to recognize the uncollectible accounts expense for 2016 will
A)increase total assets and retained earnings.
B)decrease total assets and increase retained earnings.
C)decrease total assets and net income.
D)increase total assets and decrease net income.

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The entry to recognize uncollectible accounts expense will involve a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts, both of which are contra-asset accounts. This entry will decrease total assets and net income since bad debt expense is an operating expense that is subtracted from revenue to arrive at net income.

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