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 the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

Kincaid's entry to recognize the write-off of the uncollectible accounts will:

Multiple Choice

a. increase total assets and stockholders' equity.

b. increase total assets and decrease stockholders' equity.

c. decrease total assets and stockholders' equity. (Incorrect)

d. not affect total assets or stockholders' equity.