Question

At December 31, Gill Co. reported accounts receivable of $297,000 and an allowance for uncollectible accounts of $1,600 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 5% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

Answer 1

$13,250

Step-by-step explanation:

Data provided

Accounts receivable = $297,000

Allowance for uncollectible accounts = $1,600 (credit)

Accounts receivable = 5%

The computation of uncollectible accounts is shown below:-

Accounts receivable × Accounts receivable - Allowance for uncollectible accounts

= ($297,000 × 5%) - $1,600

= $14,850 - $1,600

= $13,250

So, for computing the uncollectible accounts we applied the above formula.