I could really use some help on this question. I kicked butt on the first half of the Working Capital Becker MCQs (about 85%) and doing abysmal the second half (about 50%). This question has me stumped..
During the year, Hauser Co. wrote off a customer's account receivable. Hauser used the allowance method for uncollectable accounts. What impact would the write-off have on net income and total assets?
Obviously no effect on NI, but how is there no effect on total assets? I understand the allowance account is being written off as well, but why is the debit to Allowance the same as the credit to A/R. I mean obviously I know debits have to equal credits, but I'm struggling with the logic of debiting allowance for the entire amount of A/R. That particular account never had its entire value allocated to it for allowance (a normal example would be 100 of A/R net of 20 allowance), so why now is the entire value of the A/R debited to allowance?
I'm clearly struggling to wrap my head around this concept, and would love some help! 😀
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