Question

As of December 31, 2017, Gill Co. reported accounts receivable of $218,000 and an allowance for uncollectible accounts of $9200. During 2018, accounts receivable increased by $22,900, (that change includes $7350 of bad debts that were written off). An analysis of Gill Co.'s December 31, 2018, accounts receivable suggests that the allowance for doubtful accounts should be 4% of accounts receivable. Bad debt expense for 2018 would be:

Answer 1

Answer:

$7,786

Explanation:

Calculation to determine what Bad debt expense for 2018 would be:

First step is to calculate the Estimated bad debts

Estimated bad debts= 0.04 × ($218,000 + $22,900)

Estimated bad debts=0.04*$240,900

Estimated bad debts=$9,636

Second step is to calculate the allowance

Allowance = $9,200 - $7,350

Allowance = $1,850

Now let calculate the Bad debt expense

Using this formula

Bad debt expense = Estimated bad debts - Allowance

Let plug in the formula

Bad debt expense =$9,636 -$1,850 Bad debt expense =$7,786

Therefore Bad debt expense for 2018 would be:$7,786