[The Following Information Applies to the Questions Displayed Below

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.


-Which of the following describes the effects of Kincaid's entry to recognize the write-off of the uncollectible accounts?

A) Increase assets and stockholders' equity.
B) Increase assets and decrease stockholders' equity.
C) Decrease assets and stockholders' equity.
D) Does not affect assets or stockholders' equity.