On October 12 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 direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

a. Decrease in net income; no effect on total assets.

b. No effect on net income; no effect on total assets.

c. Decrease in net income; decrease in total assets.

d. Increase in net income; no effect on total assets.

e. No effect on net income; decrease in total assets.

Question

Colten Haney

Business

19 August, 09:05

On October 12 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 direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

a. Decrease in net income; no effect on total assets.

b. No effect on net income; no effect on total assets.

c. Decrease in net income; decrease in total assets.

d. Increase in net income; no effect on total assets.

e. No effect on net income; decrease in total assets.

+1

Answers (1)

Know the Answer?

Harper Hutchinson · Answer 1

Correct option is C.

Decrease in net income; decrease in total assets.

Explanation:

Under write off under direct method, Entry should be

Bad debt expense debit and account receivable credit

So effect is decrease net income, and decrease total assets.