[The Following Information Applies to the Questions Displayed Below

question 18

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. 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?

• A)Increase total assets and retained earnings.
• B)Decrease total assets and increase retained earnings.
• C)Decrease total assets and net income.
• D)Increase total assets and decrease net income.

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Definitions:

Long-Lived Assets

Assets that are expected to provide economic benefits to a company for a period longer than one year.

Physical Substance

An attribute indicating that an asset has tangible form and can be perceived by the senses.

Copyright

A legal right granting the creator of an original work exclusive rights to its use and distribution, typically for a limited time.

Amortization Expense

The process of gradually writing off the initial cost of an intangible asset over its useful life.