Swathmore Clothing Corporation grants its customers 30 days\' credit. The compan
ID: 2550832 • Letter: S
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 2015, accounts receivable were $588,000 and the allowance account had a credit balance of $52,000. Accounts receivable activity for 2016 was as follows $ 588,000 2,690,000 (2,553,000) (46,000) Beginning balance Credit sales Collections Write-offs Ending balance $ 679,000 The company's controller prepared the following aging summary of year-end accounts receivable Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount $405,000 96,000 56,000 122,000 Percent Uncollectible 3% 10 26 37 Total $679,000 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 transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record a summary entry to record the monthly bad debt accrual Note: Enter debits before creditsExplanation / Answer
Req A: Credit sales : $ 2690,000 Bad debts Aaccrual : 2% of credit sales Bad debts accruals charged: 2690,000 *2% = $53,800 Journal Entry for Bad Debts accrual: Bad debts Accrual Dr. 53800 Allowance for Doubtful Debts 53800 Jouurnal entry for Write offs: Allowance for doubtful Debts Dr. 46000 Accounts receivable 46000 Req B: Ending Allowance account balance as per Aging of accounts receivable: Age Group Amount % Uncollectible Allowance 0-60 405000 3% 12150 61-90 96000 10% 9600 91-120 56000 26% 14560 Over120 122000 37% 45140 679000 81450 Bad debts expense for the year: Allowance for doubtful debts in beginning 52000 Less: Actual written off 46000 Credit balance in Allowance 6000 Credit balance to be maintained in Allowance 81450 Bad debts expense for the year: 75450 Journal Entry for Adjustment of bad debts expense: Bad debts expense Dr. 75450 bad debts accrual 53800 Allowance for doubtful Debts 21650 (for bad debts expense after adjusting the amount of bad debts accrual alreaddy made) Req C: Bad debts expense for the year: 75450 Req D: Current Assets: Accounts receivable 679,000 Less: Allowance for Doubtful debts 81,450 Net Accounts receivable 597,550
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