As of January 1, 2021, Barley Co. had a credit balance of $521,000 in its allowance for uncollectible accounts. Based on experience, 1% of Barley's gross accounts receivable have been uncollectible. During 2021, Barley wrote off $651,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2021 is $18,050,000.

In its December 31, 2021, balance sheet, what amount should Farley report as allowance for uncollectible accounts?

Question

Izaiah Chang

Business

8 January, 15:49

As of January 1, 2021, Barley Co. had a credit balance of $521,000 in its allowance for uncollectible accounts. Based on experience, 1% of Barley's gross accounts receivable have been uncollectible. During 2021, Barley wrote off $651,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2021 is $18,050,000.

In its December 31, 2021, balance sheet, what amount should Farley report as allowance for uncollectible accounts?

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Answers (1)

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Jensen Sparks · Answer 1

The amount which is should be reported as an allowance for uncollectible accounts is $180,500

Explanation:

The amount for allowance for uncollectible accounts on December 31, 2021 is computed as:

Allowance for uncollectible = Gross Accounts Receivable * Percentage of uncollectible

where

gross accounts receivable amounts to $18,050,000

Percentage of uncollectible is 1%

Putting the values:

= $18,050,000 * 1%

= $180,500