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 2023, accounts receivable were $610,000 and the allowance account had a credit balance of $74,000. Accounts receivable activity for 2024 was as follows:
Beginning balance | $ 610,000 |
---|---|
Credit sales | 2,800,000 |
Collections | (2,663,000) |
Write-offs | (57,000) |
Ending balance | $ 690,000 |
The companys controller prepared the following aging summary of year-end accounts receivable:
Age Group | Summary | |
---|---|---|
Amount | Percent Uncollectible | |
060 days | $ 460,000 | 4% |
6190 days | 78,000 | 15 |
91120 days | 67,000 | 26 |
Over 120 days | 85,000 | 41 |
Total | $ 690,000 |
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 2024?
3-b. How would accounts receivable appear in the 2024 balance sheet?
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