On June 20 of the Prior Year,a Company Determined That

question 150

Multiple Choice

On June 20 of the prior year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Unexpectedly,on September 1 of the current year,the customer paid the account in full.Assuming the allowance method is used to account for bad debts,what effect will this recovery 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.

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Definitions:

Profitability

The degree to which a business or activity yields profit or financial gain.

Costs Of Production

The total expenses incurred in the process of creating and selling goods or services.

Industry Analysts

Professionals who evaluate the financial conditions, market trends, and other factors of specific sectors or industries, providing insights and forecasts.

Market Economy

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's individual citizens and businesses.