Question
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
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 2% 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 2015, accounts receivable were $584,000 and the allowance account had a credit balance of $48,000. Accounts receivable activity for 2016 was as follows: |
Beginning balance | $ | 584,000 | |
Credit sales | 2,670,000 | ||
Collections | (2,533,000) | ||
Write-offs | (44,000) | ||
Ending balance | $ | 677,000 | |
The companys controller prepared the following aging summary of year-end accounts receivable: |
Summary | ||||
Age Group | Amount | Percent Uncollectible | ||
060 days | $ | 395,000 | 5 | % |
6190 days | 94,000 | 14 | ||
91120 days | 54,000 | 24 | ||
Over 120 days | 134,000 | 35 | ||
Total | $ | 677,000 | ||
Required:
|
3-1. What is total bad debt expense for 2016?
3-2.
How would accounts receivable appear in the 2016 balance sheet?
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