Question

At December 31, Gill Co. reported accounts receivable of $236,000 and an allowance for uncollectible accounts of $1,900 (debit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

Answer 1

The amount of the adjustment for uncollectible accounts would be $ 5,180.

Step-by-step explanation:

To calculate the Adjustment for allowance for uncollectible accounts you have to perform the following:

Gross accounts receivable is $ 236,000

Allowance for uncollectible accounts 3%

236,000× 3% = 7,080. Required Balance in allowance for uncollectible accounts.

Less: Existing credit balance $ 1900

Required Adjustment= $7,080- $ 1900= $ 5,180

Required balance is 3% of $238,000 that is $7,140. Already exists $ 1,900 credit balance which makes a required adjustment of $5,180 only.