Lail IncAccounts for Bad Debts Using the Allowance Method

question 77

Multiple Choice

Lail Inc.accounts for bad debts using the allowance method.On June 1,Lail Inc.wrote off Andrew Green's $2,500 account.Based on Lail's estimation,Andrew Green will never pay any portion of the balance in his account.What effect will this write-off have on Lail Inc.'s balance sheet at the time of the write-off?

• A)An increase to stockholders' equity and a decrease to liabilities.
• B)No effect.
• C)An increase to assets and an increase to stockholders' equity.
• D)A decrease to assets and a decrease to stockholders' equity.

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