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20 June, 07:18

As of December 31, 2015, Gill Co. reported accounts receivable of $218,000 and an allowance for uncollectible accounts of $8,800. During 2016, accounts receivable increased by $22,400, and $7,650 of bad debts were written off. An analysis of Gill Co.'s December 31, 2016, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2016 would be:$6,062.$7,212. None of these answer choices are correct.$7,650.

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  1. 20 June, 10:56
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    Option (A) is correct.

    Explanation:

    Accounts receivable as on 12/31/2016 = $218,000

    A/R as on 12/31/2017:

    = Accounts receivable as on 12/31/2016 + Increase in A/R

    = $218,000 + $22,400

    = $240,400

    uncollectible accounts = 3% of accounts receivable

    = 0.03 * $240,400

    = $7,212

    Allowance 12/31/2016 = $8,800

    Writes Off = $7,650

    Therefore,

    Allowance = Allowance 12/31/2016 - Writes Off

    = $8,800 - $7,650

    = $1,150

    Hence,

    Bad debt expense for 2016 = uncollectible accounts - Allowance

    = $7,212 - $1,150

    = $6,062
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