On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales. Which of the following describes the effects of writing off the uncollectible accounts?

Question

Quizplus · Accepted Answer

Writing off uncollectible accounts reduces both Accounts Receivable and the Allowance for Doubtful Accounts by the same amount, leaving total assets and stockholders' equity unchanged.