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 2020, accounts receivable were $608,000 and the allowance account had a credit balance of $72,000. Accounts receivable activity for 2021 was as follows:
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 2021? 3-b. How would accounts receivable appear in the 2021 balance sheet?
Beginning balance Credit sales $ 608,000 2,790,000 (2,653,000) (56,000) Collections Write-offs 689,000 Ending balance The company's controller prepared the following aging summary of year-end accounts receivable: Summary Percent Uncollectible Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount $455,000 76,000 66,000 92,000 5 % 14 25 40 $689,000 TotalStep by Step Solution
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