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 $574,000 and the allowance account had a credit balance of $54,000. Accounts receivable activity for 2021 was as follows:           Beginning balance $ 574,000   Credit sales   2,620,000   Collections   (2,483,000 ) Write-offs   (68,000 ) Ending balance $ 643,000     The company’s controller prepared the following aging summary of year-end accounts receivable:       Summary Age Group   Amount Percent Uncollectible 0–60 days $ 430,000 4 % 61–90 days   98,000 15   91–120 days   60,000 25   Over 120 days   55,000 40   Total $ 643,000       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?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.
 
At the end of 2020, accounts receivable were $574,000 and the allowance account had a credit balance of $54,000. Accounts receivable activity for 2021 was as follows:
 

       
Beginning balance $ 574,000  
Credit sales   2,620,000  
Collections   (2,483,000 )
Write-offs   (68,000 )
Ending balance $ 643,000  
 


The company’s controller prepared the following aging summary of year-end accounts receivable:
 

    Summary
Age Group   Amount Percent Uncollectible
0–60 days $ 430,000 4 %
61–90 days   98,000 15  
91–120 days   60,000 25  
Over 120 days   55,000 40  
Total $ 643,000    
 


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?

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