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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.
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 2020, accounts receivable were $580,000 and the allowance account had a credit balance of $44,000. Accounts receivable activity for 2021 was as follows:
Beginning balance $ 580,000 Credit sales 2,650,000 Collections (2,513,000 ) Write-offs (42,000 ) Ending balance $ 675,000 The company’s controller prepared the following aging summary of year-end accounts receivable:
Summary
Age Group Amount Percent Uncollectible
0−60 days $ 385,000 4 %
61−90 days 92,000 12 91−120 days 52,000 22 Over 120 days 146,000 33 Total $ 675,000 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 2021?
3-b. How would accounts receivable appear in the 2021 balance sheet?
1. To record the monthly baddebtaccrual and the write-offs during the year:Bad Debt Expense (3% of credit sales) = 0.03 * 2,650,000 = 79,500Journal Entry:Dr. Bad Debt Expense 79,500Cr. Allowance for Uncollectible Accounts 79,500For write-offs:Dr. Allowance for Uncollectible Accounts 42,000Cr. Accounts Receivable 42,0002. To prepare the necessary year-end adjusting entry for bad debt expense, calculate the expected uncollectible amounts based on the aging summary:0-60 days: 385,000 * 4% = 15,40061-90 days: 92,000 * 12% = 11,04091-120 days: 52,000 * 22% = 11,440Over 120 days: 146,000 * 33% = 48,180Total Expected Uncollectible: 86,060Adjust the Allowance for Uncollectible Accounts accordingly:Adjustment = Total Expected Uncollectible - (AllowanceAccount Balance - Write-offs) = 86,060 - (44,000 - 42,000) = 84,060Journal Entry:Dr. Bad Debt Expense 84,060Cr. Allowance for Uncollectible Accounts 84,0603-a. Total Bad Debt Expense for 2021:MonthlyBadDebt Accrual + Year-end Adjustment = 79,500 + 84,060 = 163,5603-b. Accounts Receivable in the 2021 Balance Sheet:Accounts Receivable (Gross) = 675,000Less: Allowance for Uncollectible Accounts (Adjusted Balance) = 44,000 - 42,000 + 84,060 = 86,060Accounts Receivable (Net) = 675,000 - 86,060 = 588,940Learn more aboutdebthere:brainly.com/question/31102427#SPJ11...