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 of accounting for uncollectible accounts. In February of 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 answers correctly states the effect of Loudoun Company's February Year 2 entry to write 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 assets, liabilities, or equity.

On December 31, Year 1, the Loudoun Corporation Estimated That