Question

Cambridge Co. uses the allowance method. During January 2019, Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay. The entry to record the write-off will:

a. not affect expenses in 2019.
b. decrease net income in 2019 by $640.
c. decrease net accounts receivable by $640.
d. decrease total assets by $640.

Answer 1

Answer:

The correct answer is option (a).

Explanation:

According to the scenario, computation of the given data are as follows:

Allowance method shows that, if account is written off, then Accounts receivable account gets credited and Allowance accounts gets debited.

Here, both accounts are or balance sheet items.

So, it will not affect any expenses account.