On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales

What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

• Increase total assets and retained earnings

• Decrease total assets and increase retained earnings

• Decrease total assets and net income

• Increase total assets and decrease net income