Q.3 How does the year-end adjusting entry to recognize uncollectible accounts expense affect the elements of...
Q.3
How does the year-end adjusting entry to recognize uncollectible accounts expense affect the elements of the financial statements?
Multiple Choice
A. Increase total assets and decrease stockholders’ equity.
B. Increase total liabilities and increase stockholders’ equity.
C. Decrease total assets and decrease stockholders’ equity.
D. Decrease total liabilities and increase stockholders’ equity.
Homework Answers
Correct answer---------C. Decrease total assets and decrease stockholders’ equity.
.
Adjustment of uncollectable accounts at the year end increases bad debts expense which is charged to income statement and decrease net income. Decrease in net income decreases stockholder's equity. The allowance for uncollectable account increases which decreases the carrying value of accounts receivable so in turn total assets decreases too.
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Q.3
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