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 2020, accounts receivable were $614,000 and the allowance account had a credit balance of $78,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales 614,000 2,820,000 |(2,683,000) (59,000) $ Collections Write-offs 692,000 Ending balance The company's controller prepared the following aging summary of year-end accounts receivable: Summary Amount Age Group 0-60 days 61-90 days 91-120 days Over 120 days Percent Uncollectible $470,000 82,000 69,000 11 28 71,000 36 $692,000 Total

Answer 1

Req 1) General Journal Debit Credit No Event Bad debt expense 1 1 56,400 Allowance for uncollectible accounts 56,400 (to record bad debts expense) Allowance for uncollectible accounts 2. 2. 59,000 Accounts receivable 59,000 (to record write offs) Working Notes $ Credit sales 2,820,000 Bad debts multiple of credit sales Bad debts expense (2,820,000 x 2%) 2% $ 56,400

Req 2) General Journal Debit Credit No Event Bad debts expense 1 1 2,000 Allowance for uncollectible accounts 2,000 (to record bad debts expense) Working Notes Estimated Percentage uncollectible [BJ Allowance Amount Age Group [A] [Ax B 0-60 days 470,000 5% 23,500 61-90 days 11% 9,020 82,000 91-120 days 69,000 28% 19,320 25,560 36% Over 120 days 71,000 Total 692,000 77,400 Allowance for doubtful accounts Beginning Balance Add: Monthly Bad debts expense $ 78,000 56,400 (59,000) Less: Write off $ Balance before write -off (a) 75,400 $ Estimated allowance (b) 77,400 $ Required year end increase in allowance (b-a) 2,000

3-a) Bad debts expense $ 58,400 Working Notes: Monthly bad debts expense $ 56,400 Add: Year end adjustment 2,000 Total Bad debts expense 58,400 3-b) Balance sheet Current Assets Accounts receivable (net) $ 614,600 Working Notes Accounts receivable Year ending Balance 692,000 Less: Estimated Allowance for uncollectible accounts (77,400) Accounts receivable (net) $ 614,600