Q. The following data are available on a company for the current fiscal year:
Metric £ thousands Allowance for doubtful accounts balance, 1 January 137 Write-offs of accounts receivable during the year because of customer bankruptcy 86 Credit sales 21,000 Accounts receivable balance, 31 December 4,200 During the year, bad debts expense was charged at a rate of 0.5% of credit sales. At year end, an aging analysis of the accounts receivable indicates that the appropriate allowance for doub
tful accounts balance is 3% of the outstanding accounts receivable balance. The most appropriate year-end adjustment (in thousands) to the allowance for doubtful accounts is a(n):
- increase of £126.
- reduction of £116.
- reduction of £30.
