Swathmore Clothing Corporation grants its oustomers 30 days\' credit. The compan
ID: 2558364 • Letter: S
Question
Swathmore Clothing Corporation grants its oustomers 30 days' credit. The company uses the allowance method for ibs times the amount of credit sales for the month uncolectble accounts receivable. During the year, a monthly bad debt accrual is made by uncollectible accounts is adjusted accordingly . Al the iscal year-end of December 31 1, an aging of accounts receivable schedule is prepared and the allowance for end of 2 allowance account had a credit balanceof $58.000 Acounts receivable acfivily for 2018 was as follows Credt sales Write-ofis Ending balance 594,000 2,720.000 (2,583,000) 000) $ 682,000 The company's controller prepared the following aging summary of year end aocounts receivable Age Group 0-80 days 61-90 days 91-120 days 420,000 Over 120 days 682,000Explanation / Answer
Answer:
1
Event
Description
Debit $
Credit $
1
Bad debt expanses
54400
Allowance for Uncollectable accounts
54400
Bad debt expanses
=2720,000*2%
=54,400
(to record the adjustment entry for the bad debt expanses)
Allowance for Uncollectable accounts
49000
Account Receivable
49000
___________________________________
2
Description
Debit $
Credit $
Bad debt expanses
23210
Allowance for Uncollectable accounts
23210
Working notes for the above answer:
Ending balance before adjustment
= Beginning balance bad debt expanses- write off
=58000+54400-49000
=63400
Age
group
Amount
%
uncollectable
Allowance
for doubtful
account
A
B
C=A*B
0-60
420,000
3%
12600
61-90
90,000
13%
11700
91-120
59000
29%
17110
Over 120
113000
40%
45200
86610
Bad debt expanses at the year end
=86610-63400
= $23,210
_______________________________________
3.1
Total bad debt expanses for 2018
=bad debt during the year + Year End bad debt expanses
=54,400+23210
=77610
Total bad debt expases for 2018 =$77610
______________________________________
3.2
Account receivable
=682000-86610
=$595310
Balance sheet (Partial)
Current assets
Account receivable
595390
Event
Description
Debit $
Credit $
1
Bad debt expanses
54400
Allowance for Uncollectable accounts
54400
Bad debt expanses
=2720,000*2%
=54,400
(to record the adjustment entry for the bad debt expanses)
Allowance for Uncollectable accounts
49000
Account Receivable
49000
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