Question

Cash may not include:

Multiple Choice

• Foreign currency.

• Money orders.

• Accounts receivable.

• Undeposited customer checks.

At December 31, Gill Co. reported accounts receivable of $246,000 and an allowance for uncollectible accounts of $700 (debit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 6% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

Multiple Choice

• $700.

• $15,460.

• $14,760.

• $14,060.

Answer 1

• #1
  Correct Answer = Option #3: Cash may not include ‘Accounts receivables’.
  Accounts receivables are customers to whom goods have been sold or services have been provided BUT they have not yet paid the CASH.
• #2
  >Adjusted balance required in Allowance account = $ 246000 x 6% = $ 14760 Credit
  >Unadjusted balance in Allowance account = $ 700 Debit
  >Adjustment amount = Credit balance required + Debit balance existing
  = $ 14760 + 700
  = $ 15,460
  >Correct Answer = Option #2: $ 15,460