On October 17 of the current year, a company determined that a customer\'s accou

Question

On October 17 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets? Decrease in net income; no effect on total assets. No effect on net income; no effect on total assets. Decrease in net income; decrease in total assets. Increase in net income; no effect on total assets. No effect on net income; decrease in total assets.

Explanation / Answer

If the Company has determined that a customer's account receivable is uncollectible and that the account should be written off. Assuming that the allowance method is used to account for bad debts, there will be a decrease in net income and decrease in total assets.

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