Swathmore ClothingCorporation grants its customers 30 days’ credit. The company usesthe allowance method for its uncollectible accounts receivable.During the year, a monthly bad debt accrual is made by multiplying3% times the amount of credit sales for the month. At the fiscalyear-end of December 31, an aging of accounts receivable scheduleis prepared and the allowance for uncollectible accounts isadjusted accordingly.
At the end of 2017, accounts receivable were $590,000 and theallowance account had a credit balance of $54,000. Accountsreceivable activity for 2018 was as follows:
| | | | |
| Beginningbalance | $ | 590,000 | | |
| Creditsales | | 2,700,000 | | |
| Collections | | (2,563,000 | ) | |
| Write-offs | | (47,000 | ) | |
| Endingbalance | $ | 680,000 | | |
|
The company’scontroller prepared the following aging summary of year-endaccounts receivable:
| | Summary |
| Age Group | Amount | Percent Uncollectible |
| 0–60 days | $ | 410,000 | 5 | % |
| 61–90 days | | 97,000 | 11 | |
| 91–120 days | | 57,000 | 27 | |
| Over 120days | | 116,000 | 38 | |
| Total | $ | 680,000 | | |
|
Required:
1. Prepare a summary journal entry to record themonthly bad debt accrual and the write-offs during the year. (If noentry is required for a transaction/event, select "No journal entryrequired" in the first account field.) Record a summary entry torecord the monthly bad debt accrual.
2. Prepare the necessary year-end adjusting entryfor bad debt expense. Record the year-end adjusting entry for baddebt expense.
3-a. What is total bad debt expense for 2018?
3-b.How would accounts receivable appear in the 2018 balance sheet?
| BalanceSheet (partial) |
| Current assets: | |
| Accounts receivable (net) | |
