On October 12 of the prior year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Unexpectedly, on March 1 of the current year, the customer paid the account in full. Assuming the direct write-off method is used to account for bad debts, what effect will this recovery have on the company's net income and total assets?
A. No effect on net income; decrease in total assets.
B. Decrease in net income; no effect on total assets.
C. No effect on net income; no effect on total assets.
D. Decrease in net income; decrease in total assets.
E. Increase in net income; increase in total assets.
Answer: E
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