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 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 2012, accounts receivable were $582,000 and the allowance account had a credit balance of $46,000. Accounts receivable activity for 2013 was as follows: Beginning balance $ 582,000 Credit sales 2,660,000 Collections (2,523,000 ) Write-offs (43,000 ) Ending balance $ 676,000 The company’s controller prepared the following aging summary of year-end accounts receivable: Summary Age Group Amount Percent Uncollectible 0–60 days $ 390,000 3 % 61–90 days 93,000 13 91–120 days 53,000 23 Over 120 days 140,000 34 Total $ 676,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Explanation / Answer

journal entry to record the monthly bad debt accrual and the write-offs during the year.
Bad Debt Expenses ($2,660,000 x 3%) $79,800
   Allowance for uncollectble accounts $79,800

Allowance for uncollectble accounts $43,000
   Accounts Recivables $43,000

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