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On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050.
-Which of the following correctly states the effect of Loudoun Company writing off the customer's account?

Question

Quizplus · Accepted Answer

The write-off increases assets by decreasing the allowance for doubtful accounts and decreases assets (accounts receivable), resulting in no net effect on total assets, total liabilities, or stockholders' equity.

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