Net Assets Impact from Receivables Write-off and Loan Receipt

Steps:

• Writing off $10 irrecoverable trade receivables decreases assets by$10 with no change in liabilities, reducing net assets by $10.
• Receiving a $20 bank loan increases assets (cash) by$20 and liabilities (loan) by $20, leaving net assets unchanged.
• Combine the effects: net assets change = -$10 +$0 = -$10 (decrease).

Why A is correct:

• Net assets (assets minus liabilities) decrease solely by the $10 asset reduction from the write-off, per the accounting equation.

Why the others are wrong:

• B overstates the decrease by ignoring the loan's neutral impact on net assets.
• C considers only the loan's asset increase, overlooking the offsetting liability and the write-off.
• D repeats C's error of focusing solely on the loan without accounting for liabilities or the write-off.

Final answer: A