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 2020, accounts receivable were $614,000 and the allowance account had a credit balance of $78,000. Accounts receivable activity for 2021 was as follows:

Beginning balance	$	614,000
Credit sales		2,820,000
Collections		(2,683,000	)
Write-offs		(59,000	)
Ending balance	$	692,000

The company’s controller prepared the following aging summary of year-end accounts receivable:

		Summary
Age Group	Amount		Percent Uncollectible
0−60 days	$	470,000	5	%
61−90 days		82,000	11
91−120 days		69,000	28
Over 120 days		71,000	36
Total	$	692,000

Required:
1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year.

Record a summary entry to record the monthly bad debt accrual.

Record a summary entry to record the 2021 write-offs.
2. Prepare the necessary year-end adjusting entry for bad debt expense.

Record the year-end adjusting entry for bad debt expense.

3-a. What is total bad debt expense for 2021?
3-b. How would accounts receivable appear in the 2021 balance sheet?

Balance Sheet (partial)

Current assets:

Accounts receivable (net)-?

Answer 1

1)	Accounting titles & explanations				Debit	Credit
	Bad debts expense				56400
	allowance for uncollectible accounts					56,400
	(2,820,000*2%)
	Allowance for uncollectible accounts				59,000
	Account receivable					59,000
					Estimated
2)	Age group		amount	%	bad debts
	0--60		470,000	5%	23500
	61--90 days		82,000	11%	9020
	91---120 days		69,000	28%	19320
	over 120 days		71,000	36%	25560
	total		692,000		77400
	Bad debts expense				2,000
	allowance for uncollectible accounts					2,000
	77400-(78000+56400-59000)
3-a)	total bad detbs expense for the year 2018
	58,400
3-b)	Balance Sheet
	Current assets
	Account receivable				692,000
	less Allowance for uncollectible accounts				77,400
	Net account receivable				614,600