During a conversation with the credit manager, one of Tabor's sales representatives learns that a $1,272 receivable from a bankrupt customer has not been written off but was considered in the determination of the appropriate year-end balance of the Allowance for Bad Debts account balance. What is the effect of write-off on 2013 net income? CHEGG

Tabor

Write-off of Uncollectible:

The effect of a write-off of an uncollectible is that the Accounts Receivable is reduced by the amount of the write-off and the Uncollectible Expense is equally increased, which results in increased total expenses and reduced net income.

Explanation:

When a specific customer's account is identified as uncollectible, the journal entry to write off the account is:

1. A credit to Accounts Receivable (to remove the amount that will not be collected)

2. A debit to Allowance for Doubtful Accounts (to reduce the Allowance balance that was previously established)