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 2015, accounts receivable were $608,000 and the allowance account had a credit balance of $72,000. Accounts receivable activity for 2016 was as follows:
|
|
|
| Beginning balance |
$ |
608,000 |
| Credit sales |
|
2,790,000 |
| Collections |
|
(2,653,000) |
| Write-offs |
|
(56,000) |
|
|
|
| Ending balance |
$ |
689,000 |
|
|
|
The company's controller prepared the following aging summary of year-end accounts receivable:
|
|
Summary |
|
|
|
| Age Group |
|
Amount |
Percent Uncollectible |
| 0-60 days |
$ |
455,000 |
5 |
% |
| 61-90 days |
|
76,000 |
14 |
|
| 91-120 days |
|
66,000 |
25 |
|
| Over 120 days |
|
92,000 |
40 |
|
|
|
|
|
|
| Total |
$ |
689,000 |
|
|
|
|
|
|
|
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. What is total bad debt expense for 2016?
4. How would accounts receivable appear in the 2016 balance sheet?