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 $610,000 and the allowance account had a credit balance of $74,000. Accounts receivable activity for 2021 was as follows:

Beginning balance	$	610,000
Credit sales		2,800,000
Collections		(2,663,000	)
Write-offs		(57,000	)
Ending balance	$	690,000

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

		Summary
Age Group	Amount		Percent Uncollectible
0−60 days	$	460,000	4	%
61−90 days		78,000	15
91−120 days		67,000	26
Over 120 days		85,000	41
Total	$	690,000

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

repare 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 transaction/event, select "No journal entry required" in the first account field.)

No	Event	General Journal	Debit	Credit
1	1	Bad debt expense
		Allowance for uncollectible accounts
2	2	Allowance for uncollectible accounts
		Accounts receivable

Prepare the necessary year-end adjusting entry for bad debt expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Event	General Journal	Debit	Credit
1	1	Bad debt expense
		Allowance for uncollectible accounts

What is total bad debt expense for 2021?

	Bad debt expense

How would accounts receivable appear in the 2021 balance sheet?

	Balance Sheet (partial) Current assets: Accounts receivable (net)

Answer 1

	Accounts Title and Explanation	Debit	Credit
1)	Allowance For uncollectible accounts	57,000
	Accounts Receivable		57,000
	(To record write off of accounts)
	Bad debt expense	56,000
	Allowance for uncollectible accounts		56,000
	(To record monthly bad debt accrual expense)
2)	Bad debt expense	9,370
	Allowance for uncollectible accounts		9,370
	(To pass adjustment entry for bad debt expense)
	Note 1:
	Age Group	Amount	% uncollectible	Allowances for uncollectible accounts
	0-60 days	460,000	4%	18,400
	61-90 days	78,000	15%	11,700
	91-120 days	67,000	26%	17,420
	Over 120 days	85,000	41%	34,850
	Total	690,000		82,370
	Allowance Required	82,370
	Less: Already have balance	73,000
	More to be debit to expense	9,370
3-a)	Bad debt expense for 2021	65,370	(56000+9370)
3-b	Balance Sheet (Partial)
	Current Assets:
	Accounts receivable, Gross	690,000
	Less: Allowance for uncollectible account	82,370
	Accounts receivable, Net	607,630