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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.

Respuesta :

Answer:

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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