Swathmore Clothing Corporation grants its customers 30 days\' credit. The compan

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 2017, accounts receivable were $598,000 and the allowance account had a credit balance of $62,000. Accounts receivable activity for 2018 was as follows Beginning balance $598,000 2,740,000 Credit sales Collections Write-offs Ending balance (2, 603, 000) (51,000) S 684,000 The company's controller prepared the following aging summary of year-end accounts receivable Summary Amount Percent Uncollectible Age Group 0-60 days 61-90 days 91-120 days Over 120 days $430,000 92,000 61,000 101,000 $684,000 15 20 35 Total 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 2018? 3-b. How would accounts receivable appear in the 2018 balance sheet?

Explanation / Answer

1) Accounting titles & explanations Debit Credit Bad debts expense 54800 allowance for uncollectible accounts 54,800 (2,740,000*2%) Allowance for uncollectible accounts 51,000 Account receivable 51,000 Estimated 2) Age group amount % bad debts 0--60 430,000 4% 17200 61--90 days 92,000 15% 13800 91---120 days 61,000 20% 12200 over 120 days 101,000 35% 35350 total 684,000 78550 Bad debts expense 12750 allowance for uncollectible accounts 12,750 78,550-(62000+54800-51000) 3-a) total bad detbs expense for the year 2018 67550 3-b) Balance Sheet Current assets Account receivable 684,000 less Allowance for uncollectible accounts 78,550 Net account receivable 605,450

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