Question

c. During a conversation with the credit manager, one of Tabor's sales representatives learns that a $1,281 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 2019 net income

Answer 1

Answer:

Tabor

The effect of the write-off of the bad debt or uncollectible is a reduction of the 2019 net income by $1,281.

Explanation:

The write-off of the bad debt also reduces the Allowance for Bad Debts account balance and the Accounts Receivable balance in the account of Tabor by $1,281.  The purpose is to accurately report Tabor's net income by taking into account all expenses and losses, just as all revenues and incomes must be accounted for.  This gives a more accurate picture of Tabor's financial performance during the current financial period.