14. On October 12 of the current year, a company determined that a customer's account receivable was
uncollectible and that the account should be written off. Assuming the direct write-off method is used
to account for bad debts, what effect will this write-off have on the company's net income and total
assets?
A) Decrease in net income; decrease in total assets.
B) Decrease in net income; no effect on total assets.
C) Increase in net income; no effect on total assets.
D) No effect on net income; no effect on total assets.
E) No effect on net income; decrease in total assets.
A) Decrease in net income; decrease in total assets.
When using the direct write-off method, uncollectible accounts receivable are directly removed from the balance sheet, decreasing total assets. This write-off also results in a decrease in net income because it represents a loss that is recognized in the income statement as an expense. Therefore, both net income and total assets are affected negatively.
