Statement of Cash Flows Problem

7-1 Uncollectible accounts; allowance method; income statement and balance sheet approach [LO7-5, 7-6] Swathmore Clothing Corporation grants its customers 30 days credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 3% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2017, accounts receivable were $574,000 and the allowance account had a credit balance of $54,000. Accounts receivable activity for 2018 was as follows:

Beginning balance $ 574,000

Credit sales 2,620,000

Collections (2,483,000 )

Write-offs (68,000 )

Ending balance $ 643,000

________________________________________

The companys controller prepared the following aging summary of year-end accounts receivable:

Summary Age Group Amount Percent Uncollectible

060 days $ 430,000 4 %

6190 days 98,000 15%

91120 days 60,000 25%

Over 120 days 55,000 40%

Total $ 643,000

________________________________________

Required:

1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year.

2. Prepare the necessary year-end adjusting entry for bad debt expense.

3-a. What is total bad debt expense for 2018?

3-b. How would accounts receivable appear in the 2018 balance sheet?