Question

At January 1, 20X7, Gear Co. had a credit balance of $180,000 in its allowance for uncollectible accounts. Based on past experience, 3% of Gear’s credit sales have been uncollectible. During 20X7, Gear wrote off $210,000 of uncollectible accounts. Credit sales for 20X7 were $4,500,000. In its December 31, 20X7 balance sheet, what amount should Gear report as allowance for uncollectible accounts?a. $135,000

b. $105,000
c. $320,000
d. $210,000

Answer 1

b. $105,000

Step-by-step explanation:

Beginning allowance for uncollectible accounts = $180,000

Uncollectible written off = $210,000

Allowance for the year 20X7 = Credit sales * 3%

= $4,500,000 * 3%

= $135,000

Allowance for uncollectible accounts = $180,000 - $210,000 + $135,000

= $105,000

Therefore, The amount that Gear should report as allowance for uncollectible accounts is $105,000.