On December 31, 2014, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2015, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2015, the customer paid the account in full.
Which of the following answers correctly states the effect of Landon's write-off entry on February 15, 2015?

Question

Quizplus · Accepted Answer

When Landon writes off the account of one of its customers, there is no change in the total amount of accounts receivable or the allowance for uncollectible accounts. However, the specific customer's account balance is removed from the accounts receivable balance and is instead recorded as a bad debt expense (contra-revenue) in the income statement. This reduces the net income and the total assets (accounts receivable) by $2,500. Note that the allowance for uncollectible accounts is not affected because it was already established at the end of the previous accounting period based on the estimated percentage of uncollectible accounts.

On December 31, 2014, the Landon Corporation Estimated That 3