Question

Under the allowance method, when a receivable that had been previously written off is collected, Group of answer choices Net assets are increased. Net assets and net income are both increased. Net income and net assets are not affected. Net income is increased.

Answer 1

Under the allowance method, when a receivable that had been previously written off is collected,

Net assets and net income are both increased.

Step-by-step explanation:

For this transaction, the accounts receivable is debited, while the allowance for doubtful accounts is credited to revise the previous entry for writing off the receivable. In addition, the cash account is debited, while the accounts receivable account is credited to record the receipt of cash and settlement of debt. Thus, the net assets (cash account) and net income (following a reduction in the allowance for doubtful accounts in the current period) are increased.