Concept explainers
Uncollectible accounts; allowance method; income statement and balance sheet approach
• LO7–5, LO7–6
Swathmore Clothing Corporation grants its customers 30 days’ credit. The company uses the allowance method for its uncollectible
At the end of 2017, accounts receivable were $574,000 and the allowance account had a credit balance of $54,000. Accounts receivable activity for 2018 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. What is total bad debt expense for 2018? How would accounts receivable appear in the 2018 balance sheet?
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INTERMEDIATE ACCT VOL.2>CUSTOM<
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