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 recording the collection of the reestablished receivable on April 4, Year 2?

Question

Quizplus · Accepted Answer

Once the receivable is reestablished, collection of the receivable is recorded as an increase to assets (cash) and a decrease to assets (accounts receivable), resulting in no net effect to assets. It is reported as a cash inflow for operating activities.

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