Question

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.

Answer 1

Solution-

$6,062

Calculation-

Step-1
A/R 12/31/2016	$218,000
Increase	$22,400
A/R 12/31/2017	$240,400
	*3%
Uncollectible	$7,212
Step-2
Allowance 12/31/2016	$8,800
Writes Off	$(7,650)
Allowance	$1,150
Step-3
$7,212-$1,150	$6,062