On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $64,000 and $1,400, respectively. During Year 2, Kincaid reported $155,000 of credit sales, wrote off $1,250 of receivables as uncollectible, and collected cash from receivables amounting to $166,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. What effect will the entry to recognize the uncollectible accounts expense for Year 2 have on the elements of the financial statements? Multiple Choice Increase total assets and retained earnings. Decrease total assets and increase retained earnings. Decrease total assets and net income. Increase total assets and decrease net income.
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $64,000 and $1,400, respectively. During Year 2, Kincaid reported $155,000 of credit sales, wrote off $1,250 of receivables as uncollectible, and collected cash from receivables amounting to $166,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.
What effect will the entry to recognize the uncollectible accounts expense for Year 2 have on the elements of the financial statements?
-
Increase total assets and
retained earnings . -
Decrease total assets and increase retained earnings.
-
Decrease total assets and net income.
-
Increase total assets and decrease net income.
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