At December 31, Gill Co. reported accounts receivable of $286,000 and an allowance for uncollectible accounts of $1,300 (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:

Gill Co.

The amount of the adjustment for uncollectible accounts would be:

$13,000

Explanation:

a) Data and Calculations:

Accounts Receivable = $286,000

Allowance for uncollectible accounts = $1,300 (credit balance)

Allowance should be = 5% of accounts receivable

= $286,000 * 5% = $14,300

The adjustment = $13,000 ($14,300 - $1,300)

b) The adjustment of $13,000 will bring the credit balance to a total of $14,300, which is the required allowance for the year.  The adjustment is to debit the Uncollectible Expense account with $13,000 and credit the Allowance for Uncollectible Accounts with $13,000.

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