A company is in its first year of operations and has never written off any accounts receivable as uncollectible. When the allowance method of recognizing bad debt expense is used, the entry to recognize that expense

 A company is in its first year of operations and has never written off any accounts receivable as uncollectible. When the allowance method of recognizing bad debt expense is used, the entry to recognize that expense
Increases net income.
Decreases current assets. Correct
Has no effect on current assets.
Has no effect on net income.
 You Answered Correctly!
This answer is correct. When the allowance method of recognizing bad debt expense is used, the journal entry is

Bad debt expense    xxx    
      Allowance for bad debts         xxx

The allowance account is a contra account to accounts receivable. Since accounts receivable is a current asset, current assets will be decreased by the allowance for bad debts.