Question

Hoff Company uses the allowance method. An account that had been previously written-off as uncollectible was recovered. How do the two parts of the recovery (reinstate receivable and collect the receivable) affect the elements of the financial statements when the two parts are considered together?

Answer 1

Answer:

The recovery has no effect on total assets, liabilities or stockholders equity

Explanation:

The questions seems to ask the impact of the recovery on the elements of financial statements.

The elements of the financial statements are:

• Total assets
• Liabilities
• Stockholders's equity

The recovery has no effect on total assets, liabilities or stockholders equity

Reinstating the already written off account and collection doesn't have any impact on the total assets, liabilities or stockholders equity.