Reference no: EM132856550

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $63,400 and $1,300, respectively. During the year, Kincaid reported $152,000 of credit sales. Kincaid also wrote off $1,200 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $161,300. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

Problem 1: Kincaid's entry required to recognize the uncollectible accounts expense for Year 2 will:

Multiple Choice

Option 1: decrease total assets and net income.
Option 2: increase total assets and retained earnings.
Option 3: decrease total assets and increase retained earnings.
Option 4: increase total assets and decrease net income.