The Brown Company sells small office equipment and fixtures on credit. Their end

Question

The Brown Company sells small office equipment and fixtures on credit.  Their ending balance in Accounts Receivable for 2012 was $120,000.  It was expected that $5,000 of this balance would later prove to be uncollectible, so Brown set up an Allowance for Doubtful Accounts for $5,000, and declared $5,000 as Bad Debts Expense for 2012.  In June of 2013, Brown determined that a $1,285 receivable owed by Molly Quinn should be written off.  Discuss the impact that this June write off action will have on Brown's Net Income for 2012 and 2013, and explain your answer.

Explanation / Answer

There is no bad debt expense reported on the income statement until an account receivable is written off.

So June 2013 write off will not have any impact in Net Income of 2012

In 2013 , the write off will result in an expense in 2013 Income statement and Net Income will fall by $1285.

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