Ace Computing Company on January 1, Year 1, the Accounts Receivable and the Receivable

question 16

Multiple Choice

Ace Computing Company
On January 1, Year 1, the accounts receivable and the allowance for doubtful accounts carried balances of $40,000 and $1,500 respectively. During the year, the company reported $80,000 of credit sales. There were receivables of $500 written off as uncollected in Year 1. Cash collections of receivables amounted to $78,200. The company estimates that it will be unable to collect 4% of the year-end accounts receivable balance.
-Refer to the figure Ace Computing Company.What will be the impact of the entry required to recognize the bad debts expense for Year 1?

• A) Total assets and retained earnings increase.
• B) Total assets and retained earnings decrease.
• C) Total assets decrease and net income increases.
• D) Total assets increase and net income decreases.

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Definitions:

Climatic Regions

Areas of the Earth characterized by distinct weather patterns and atmospheric conditions over a long period.

Seasons

Periodic changes in the environment and weather patterns, often delineated by significant variations in temperature, precipitation, and day length, influencing ecosystems and human activities.

Temperate Grasslands

Ecosystems characterized by moderate temperatures and precipitation, hosting vast expanses of grasses and few trees.

Topsoil

The uppermost layer of soil that is rich in organic matter and nutrients, used extensively for cultivation and planting.