Acc422 Intermediate Accounting: P7-1 Swathmore Cloting Corporation grants its customers
Acc422 Intermediate Accounting P 7-1 Uncollectible accounts; allowance method; income statement and balance sheet approach 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 2010, accounts receivable were $574,000 and the allowance account had a credit balance of $54,000. Accounts receivable activity for 2011 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: Age Group Amount Percentage Uncollectible 0-60 days $430,000 4% 61-91 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 2011? How would accounts receivable appear in the 2011 balance sheet?
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