DEF wrote off a $300 uncollectible account receivable against the $3,600 balance in its allowance account.Compare the current ratio before the write-off with the current ratio after the write-off.
A)The current ratio before the write-off is less than the current ratio after the write-off.
B)The current ratio before the write-off is equal to the current ratio after the write-off.
C)The current ratio before the write-off is greater than the current ratio after the write-off.
D)The current ratio cannot be determined from information given.
E)None of these choices are correct.

Question

Quizplus · Accepted Answer

The current ratio, which compares current assets to current liabilities, remains unchanged by the write-off of an uncollectible account receivable against the allowance for doubtful accounts. Both the asset (accounts receivable) and the contra asset (allowance for doubtful accounts) decrease by the same amount, leaving the total current assets unchanged.

DEF Wrote Off a $300 Uncollectible Account Receivable Against the $3,600