On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $73,200 and $3,400, respectively. During Year 2, Kincaid reported $201,000 of credit sales, wrote off $1,900 of receivables as uncollectible, and collected cash from receivables amounting to $246,700. Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

Question

Quizplus · Accepted Answer

Recognizing the uncollectible accounts expense for Year 2 by writing off $1,900 of receivables as uncollectible will decrease the total assets (Accounts Receivable) and, because this is an expense, it will decrease the net income for Year 2. It will not have any effect on retained earnings as this is a non-cash transaction.