Swathmore Clothing Corporation grants its customers 30 days’credit. The company uses the allowance method for its uncollectibleaccounts receivable. During the year, a monthly bad debt accrual ismade by multiplying 2% times the amount of credit sales for themonth. At the fiscal year-end of December 31, an aging of accountsreceivable schedule is prepared and the allowance for uncollectibleaccounts is adjusted accordingly.
At the end of 2020, accounts receivable were $592,000 and theallowance account had a credit balance of $56,000. Accountsreceivable activity for 2021 was as follows:
| | | | |
| Beginning balance | $ | 592,000 | | |
| Credit sales | | 2,710,000 | | |
| Collections | | (2,573,000 | ) | |
| Write-offs | | (48,000 | ) | |
| Ending balance | $ | 681,000 | | |
|
The company’s controller prepared the following aging summary ofyear-end accounts receivable:
req1-
1. Record a summary entry to record the monthly bad debtaccrual.
2. Record a summary entry to record the 2021 write-offs.
req 2-
1. Record the year-end adjusting entry for bad debt expense.
req 3a-
What is total bad debt expense for 2021?
req 3b-
How would accounts receivable appear in the 2021 balancesheet?
| | Summary |
| Age Group | Amount | Percent Uncollectible |
| 0?60 days | $ | 415,000 | 4 | % |
| 61?90 days | | 98,000 | 12 | |
| 91?120 days | | 58,000 | 28 | |
| Over 120 days | | 110,000 | 39 | |
| Total | $ | 681,000 | | |
|
Required:
1. Prepare a summary journal entry to record themonthly bad debt accrual and the write-offs during the year.
2. Prepare the necessary year-end adjusting entryfor bad debt expense.
3-a. What is total bad debt expense for2021?
3-b. How would accounts receivable appear in the2021 balance sheet?
