Swathmore Clothing Corporation grants its customers 30 days’ credit. The company

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 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 2010, accounts receivable were $562,000 and the allowance account had a credit balance of $46,000. Accounts receivable activity for 2011 was as follows:

  Beginning balance $ 562,000   
     Credit sales 2,740,000   
     Collections (2,615,000)
     Write-offs (51,000)

  Ending balance $ 636,000   
The company’s controller prepared the following aging summary of year-end accounts receivable

Summary

  Age Group Amount Percent Uncollectible
  0–60 days $ 426,120 4 %
  61–90 days 95,400 15
  91–120 days 69,960 25
  Over 120 days 44,520 40


  Total $ 636,000

Required:

(1)

Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. (Omit the "$" sign in your response.)

  

General Journal Debit Credit
  Monthly bad debt expense accrual summary.
  
(Click to select)
Bad debt expense
Accounts receivable
Cash
Allowance for uncollectible accounts
Interest receivable
  
       
(Click to select)
Interest receivable
Note receivable
Allowance for uncollectible accounts
Cash
Accounts receivable
  

  To record year 2011 accounts receivable write-offs.
  
(Click to select)
Note receivable
Interest receivable
Accounts receivable
Allowance for uncollectible accounts
Cash
  
       
(Click to select)
Cash
Accounts receivable
Note receivable
Allowance for uncollectible accounts
Interest receivable

Prepare the necessary year-end adjusting entry for bad debt expense. (Round your intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

General Journal Debit Credit
  
(Click to select)
Interest receivable
Accounts receivable
Bad debt expense
Note receivable
Allowance for uncollectible accounts
  
       
(Click to select)
Interest receivable
Cash
Accounts receivable
Note receivable
Allowance for uncollectible accounts

(3-a)

What is total bad debt expense for 2011? (Round your intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

  Bad debt expense $   

(3-b)

How would accounts receivable appear in the 2011 balance sheet? (Round your intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

Balance sheet
  Current assets:
  Accounts receivable $   

Explanation / Answer

1)

2)

Allowance for uncollectible accounts

Beginning bal. :                  $46,000

add bad debts expense : $54,800

less Write-offs                 :   ($51,000)

Ending bal. before adjustment :$49,800

From the calculation the year ending adjustment required will be = $66,652 - 49800 = $16,852

The journal entry will be :

Dr Bad debts expense $16,852

Cr allowance for uncollectible accounts $16,852

3a)

Total bad debt expense for 2011 = $54,800 +16852 = $71,652

3b)

Under current Assets

Accounts receivable $636,000
less allowance for uncollectible accounts $66,652
Net accounts receivable $569,348

Age Group Amount % Uncoll Allowance needed 0–60 days 426,120 4% $17,044 61–90 days 95,400 15% $14,310 91–120 days 69,960 25% $17,490 Over 120 days 44,520 40% $17,808 Total $636,000 $66,652

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