Question

As of December 31, 2020, Gill Co. reported accounts receivable of $233,000 and an allowance for uncollectible accounts of $8,900. During 2021, accounts receivable increased by $22,900, (that change includes $7,350 of bad debts that were written off). An analysis of Gill Co.'s December 31, 2021, accounts receivable suggests that the allowance for uncollectible accounts should be 4% of accounts receivable. Bad debt expense for 2021 would be:

Answer 1

$8,686

Step-by-step explanation:

Calculation to determine what the Bad debt expense for 2021 would be

First step is to calculate the Estimated bad debts

Estimated bad debts=

($233,000+$22,900)*4%

Estimated bad debts=$10,236

Second step is to calculate the Allowance

Allowance=$8,900-$7,350

Allowance$1,550

Now let calculate the Bad debts expense

Bad debts expense=$10,236-$1,550

Bad debts expense=$8,686

Therefore the Bad debt expense for 2021 would be $8,686