3. Swathmore Clothing Corporation grants its customers 30 days’ credit. The company uses the allowance method for...

3.8 Ratings (593 Votes)

1
	Debit	Credit
Bad debt expense	53400		=2670000*2%
Allowance for uncollectible accounts		53400

Allowance for uncollectible accounts	44000
Accounts receivable		44000

2
	Debit	Credit
Bad debt expense	35370
Allowance for uncollectible accounts		35370

3a
Bad debt expense	88770		=53400+35370

3b
Balance sheet
Current assets:
Accounts receivable (net)	584230		=677000-92770

Workings:
	Amount	% uncollectible	Amount uncollectible
0—60 days	395000	5%	19750
61—90 days	94000	14%	13160
91—120 days	54000	24%	12960
Over 120 days	134000	35%	46900
Total	677000		92770

Beginning balance, Allowance	48000
Add: Monthly bad debt accruals	53400
Deduct: Write-offs	-44000
Unadjusted balance	57400
Required allowance	92770
Required year-end increase in allowance	35370

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