On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $72,400 and $3,200, respectively. During Year 2, Kincaid reported $197,000 of credit sales, wrote off $1,850 of receivables as uncollectible, and collected cash from receivables amounting to $239,900. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

Which of the following describes the effects of Kincaid's entry to recognize the write-off of the uncollectible accounts?

Multiple Choice

Increase assets and stockholders' equity.

Does not affect assets or stockholders' equity.

Decrease assets and stockholders' equity.

Increase assets and decrease stockholders' equity.