Swathmore Clothing Corporation grants its customers 30 days’ credit. The company
ID: 2490955 • Letter: S
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 2012, accounts receivable were $596,000 and the allowance account had a credit balance of $60,000. Accounts receivable activity for 2013 was as follows:
Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)
Prepare the necessary year-end adjusting entry for bad debt expense. (If no entry is required for an event, select "No journal entry required" in the first account field.)
What is total bad debt expense for 2013
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 2012, accounts receivable were $596,000 and the allowance account had a credit balance of $60,000. Accounts receivable activity for 2013 was as follows:
Beginning balance $ 596,000 Credit sales 2,730,000 Collections (2,593,000 ) Write-offs (50,000 ) Ending balance $ 683,000 The company’s controller prepared the following aging summary of year-end accounts receivable: Summary Age Group Amount Percent Uncollectible 0–60 days $ 425,000 5 % 61–90 days 91,000 14 91–120 days 60,000 30 Over 120 days 107,000 41 Total $ 683,000 Required:Explanation / Answer
Summary Age Group Amount Percent Uncollectible Estimated amt of uncollectible 0–60 days 425,000 5 21250 61–90 days 91,000 14 12740 91–120 days 60,000 30 18000 Over 120 days 107,000 41 43870 Total 683,000 95860 Accounts Title Dr Cr Ans 1 Bad debt expense (2730000*2%) 54600 Allowance for Doubtful Debts 54600 (Being 2% bad debt accural for the month Allowance for Doubtful Debts 50,000 Accounts Receivable 50000 (being accounts receivable written off) Ans 2 Bad Debt expense 31260 Allowance for Doubtful Debts 31260 Allowance for Doubtful Debts Beginning Balance 60000 Total bad debt accurals 54600 Less: Write off -50000 Ending balance before adjustment 64600 The allownace balance has to be $95860 so we need to increase the ending balanc before adjustment 95860-64600 31260 In 2013 Total bad debt expense 54600+31260 85860 Balance Sheet 2013 Accounts Receivable (Gross) 683000 Less: allowance for Doubtful Debts -95860 Accounts Receivable (Net) 587140
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