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 $588,000 and the allowance account had a credit balance of $52,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales Collections Write-offs Ending balance $ 588,000 2,690,000 (2,553,000) (46,000) $ 679,000 The company's controller prepared the following aging summary of year-end accounts receivable: Summary Percent Uncollectible 3 % 10 Age Group 0-60 days 61-90 days 91-120 days Over 120 days Total Amount $405,000 96,000 56,000 122,000 $ 679,000 26 37 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?

Answer 1

Answer: Requirment -1 Bad Debts Expense = $ 2690000 * 2% = $ 53800 Account Tittle Bad Debts Expanse Allowance for Uncollectible accounts (To record Monthly bad debt expenses) Credit Debit $ 53,800 $ 53,800 $ 46,000 Allowance for Uncollectible accounts Account Receivable To record Write off) $ 46,000 Requirment-2 Age Group 0-60 days 61-90 days 91-120 days over 120 days Total Amount $ 4,05,000 $ 96,000 $ 56,000 $ 1,22,000 $ 6,79,000 Percent Allowance Uncollectible Required 3% $ 12,150 10% $ 9,600 26% $ 14,560 37% $ 45,140 $ 81,450 $ $ Allowance for Uncollectible Account Beggining Balance Add: Bad Debts expenses accrual Less: Write off Ending Balance Required Allowance Increase in Allowance required ( 81450-59800) $ $ $ $ 52,000 53,800 -46,000 59,800 81,450 21,650 Credit Adjustment Entry at Year end Account Tittle Bad Debts Expanse Allowance for Uncollectible accounts (To record Adjustment entry for Bad Debts) Debit $ 21,650 $ 21,650 Requirment -3a Bad Debts expenses for 2021 Monthly Accruals Year end adjustment Total $ $ $ 53,800 21,650 75,450 Requirment -3b Account Receivable appear in 2021 Balance Sheet = 588000 - 81450 = $ 506550 Please Give me Positive Vote, Let me know if you need any further Information regarding Question.