Final answer:
When a company using the allowance method writes off a bad debt, the correct answer is d. No effect on overall assets or equity.
Step-by-step explanation:
In the allowance method, the company anticipates that some accounts will be uncollectible and creates an allowance for doubtful accounts in advance, which is a contra-asset account that offsets accounts receivable.
When an account is deemed uncollectible and is written off, the company reduces both the accounts receivable and the allowance for doubtful accounts by the amount of the bad debt. So, while the accounts receivable (an asset) is reduced, the allowance for doubtful accounts (which reduces total assets) is also reduced by the same amount. This means the total assets do not change. Since this transaction is an adjustment within assets, there is no direct effect on stockholders' equity at the time of the write-off. However, stockholders' equity would have been previously affected when the bad debt expense was estimated and recorded, reducing net income and retained earnings.