Brandon Corporation generated $98,000 in credit sales during 20X2. In February 20X3, Brandon realized that $13,500 of the accounts receivable generated from the 20X2 credit sales were uncollectible
Brandon seldom experiences bad debts losses; therefore, it used the specific write-off method. Using the matching principle, what is the effect on 20X3 and 20X2 net income as a result of the write-off?
A) 20X3 net income is understated by $13,500, while 20X2 net income is overstated by $13,500.
B) 20X3 net income is overstated by $13,500, while 20X2 net income is understated by $13,500.
C) 20X3 net income is neither overstated nor understated, but 20X2 net income is understated by $13,500.
D) 20X3 net income is overstated by $13,500, but 20X2 net income is neither overstated nor understated.
E) There is no effect on either year's net income as revenues and expenses are properly matched.
A
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