During the Current Year, TechCom Concluded That a Customer's $4,400

question 122

Multiple Choice

During the current year, TechCom concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on TechCom's current year net income and balance sheet assuming the allowance method is used to account for bad debts?

• A) No effect on net income or on total assets
• B) Decrease in 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:

Master Budget

An all-encompassing financial plan for a company, consolidating all its individual budgets related to sales, cost of goods sold, operating expenses, assets, liabilities, and cash flows.

Direct Labor

The wages and related expenses for workers who are directly involved in the production of goods.

Cost of Tracie's Direct Labor

The cost of Tracie's direct labor refers to the wages and associated expenses for the hours worked directly on products or services by Tracie, as an example of an employee's labor costs.

Budgeted Data

A financial plan for the future concerning the revenues and costs of a business.