Lail Inc.accounts for bad debts using the allowance method.On June 1,Lail Inc.wrote off Andrew Green's $2,500 account.Based on Lail's estimation,Andrew Green will never pay any portion of the balance in his account.What effect will this write-off have on Lail Inc.'s balance sheet at the time of the write-off?

Question

Quizplus · Accepted Answer

The write-off of a bad debt using the allowance method does not affect the balance sheet's total assets or stockholders' equity because the allowance for doubtful accounts (a contra-asset account) is reduced along with accounts receivable, keeping the net accounts receivable unchanged.

Lail IncAccounts for Bad Debts Using the Allowance Method