Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its
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 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 $580,000 and the allowance account had a credit balance of $44,000. Accounts receivable activity for 2018 was as follows:
Beginning balance$580,000Credit sales2,650,000Collections(2,513,000)Write-offs(42,000)Ending balance$675,000
The company's controller prepared the following aging summary of year-end accounts receivable:
SummaryAge GroupAmountPercent Uncollectible0-60 days$385,0004%61-90 days92,0001291-120 days52,00022Over 120 days146,00033Total$675,000
Required:
1.Prepare the 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?