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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