[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.


-What effect will the entry to recognize the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

A) Increase total assets and retained earnings.
B) Decrease total assets and increase retained earnings.
C) Decrease total assets and net income.
D) Increase total assets and decrease net income.