Question

At December 31, Gill Co. reported accounts receivable of $241,000 and an allowance for uncollectible accounts of $1,450 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:A. $6,540. B. $7,800. C. $7,140. D. $7,740.

Answer 1

$3,370

Step-by-step explanation:

Given that,

Accounts receivables at December 31 = $241,000

Allowance for uncollectible accounts = $1,450 (credit)

Allowance for uncollectible accounts should be 2% of accounts receivable.

We need to deduct the credit balance of the allowance for uncollectible accounts from the actual allowance for uncollectible accounts because it should be 2 percent of the accounts receivables.

Amount of the adjustment for uncollectible accounts:

= Allowance for uncollectible accounts should be - Credit balance under the Allowance for uncollectible accounts

= ($241,000 × 2%) - $1,450

= $4,820 - $1,450

= $3,370