Question

A large customer owing million for products it already received declared​ bankruptcy, leaving no possibility that Global would ever receive payment. ​(Select the best choice​ below.) A. Accounts receivable would decrease by ​million, and the book value of equity would increase by the same amount. B. Accounts receivable would increase by ​million, as would the book value of equity. C. Accounts receivable would increase by ​million, and the book value of equity would decrease by the same amount. D. Accounts receivable would decrease by ​million, as would the book value of equity.

Answer 1

D. Accounts receivable would decrease by ​million, as would the book value of equity.

Step-by-step explanation:

Accounts receivable is a record of payments that a business has not received from its customers for goods and services given.

When payment is eventually made the revenue account is credited and accounts receivable reduces.

If however there is no possibility of receiving payment, the amount is moved from accounts receivable to allowance for doubtful accounts.

This is recognised as a loss.

So accounts receivable would decrease by ​million, as would the book value of equity.