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's recording the reestablishment of the receivable on April 4, Year 2?

Question

Quizplus · Accepted Answer

Reestablishing the receivable increases assets (accounts receivable) and decreases assets (increase to allowance for doubtful accounts), resulting in no net effect to assets.

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