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31 August, 20:31

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

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  1. 31 August, 20:49
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    b. $105,000

    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.
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