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On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $70,400 and $2,800, respectively. During Year 2, Kincaid reported $187,000 of credit sales, wrote off $1,700 of receivables as uncollectible, and collected cash from receivables amounting to $222,300. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

Which of the following describes the effects of Kincaids entry to recognize the write-off of the uncollectible accounts?

• Increase assets and stockholders equity.

• Increase assets and decrease stockholders equity.

• Decrease assets and stockholders equity.

• Does not affect assets or stockholders equity.