[amp_mcq option1=”increases net income” option2=”decreases net income” option3=”increases gross profit” option4=”increases gross profit and net income” correct=”option1″]<\/p>\n
The correct answer is A. increases net income.<\/p>\n
When a company recovers a bad debt, it means that the company has received payment for an account that was previously written off as uncollectible. This increases the company’s cash flow and reduces its bad debt expense. As a result, net income increases.<\/p>\n
Option B is incorrect because a recovery of bad debt does not decrease net income. In fact, it does the opposite.<\/p>\n
Option C is incorrect because a recovery of bad debt does not increase gross profit. Gross profit is calculated by subtracting the cost of goods sold from sales. A recovery of bad debt does not affect the cost of goods sold, so it does not affect gross profit.<\/p>\n
Option D is incorrect because a recovery of bad debt does not increase gross profit and net income. It only increases net income.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”increases net income” option2=”decreases net income” option3=”increases gross profit” option4=”increases gross profit and net income” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-8882","post","type-post","status-publish","format-standard","hentry","category-accounting","no-featured-image-padding"],"yoast_head":"\n