On November 2, 2016, Quaint General Store concluded that a customer's $400 account receivable was uncollectible and that the account should be written off.What effect will this write-off have on Quaint's 2016 net income and balance sheet totals assuming the allowance method is used to account for bad debts?
A) Decrease in net income; decrease in total assets
B) Increase in net income; no effect on total assets
C) No effect on net income; decrease in total assets
D) No effect on net income; no effect on total assets

Question

Quizplus · Accepted Answer

Under the allowance method, bad debts expense is estimated and recorded in the period when the related sales occur, not when specific accounts are deemed uncollectible. Writing off an account receivable under this method only affects the balance sheet by reducing both Accounts Receivable and the Allowance for Doubtful Accounts, with no impact on net income or total assets.

On November 2, 2016, Quaint General Store Concluded That a Customer's