5. 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 3% 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 2023, accounts receivable was RM582,000 and the allowance account had a credit balance of RM46,000. Accounts receivable activity for 2024 was as follows: Beginning balance Credit sales RM 582,000 2,660,000 (2,523,000) (43,000) RM 676,000 Collections Write-offs Ending balance The company's controller prepared the following aging summary of year-end accounts receivable: Age Group 0-60 days 61-90 days 91-120 days Over 120 days Total Summary Amount RM 390,000 93,000 53,000 140,000 RM 676,000 Percent Uncollectible 3% 13 23 34 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 2024? 3-b. How would accounts receivable appear in the 2024's SOFP?
5. 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 3% 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 2023, accounts receivable was RM582,000 and the allowance account had a credit balance of RM46,000. Accounts receivable activity for 2024 was as follows: Beginning balance Credit sales RM 582,000 2,660,000 (2,523,000) (43,000) RM 676,000 Collections Write-offs Ending balance The company's controller prepared the following aging summary of year-end accounts receivable: Age Group 0-60 days 61-90 days 91-120 days Over 120 days Total Summary Amount RM 390,000 93,000 53,000 140,000 RM 676,000 Percent Uncollectible 3% 13 23 34 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 2024? 3-b. How would accounts receivable appear in the 2024's SOFP?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Transcribed Image Text:5. 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 3% 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 2023, accounts receivable was RM582,000 and the allowance account had a credit
balance of RM46,000. Accounts receivable activity for 2024 was as follows:
Beginning balance
Credit sales
Collections
Write-offs
Ending balance
The company's controller prepared the following aging summary of year-end accounts receivable:
Summary
Amount
RM 390,000
93,000
53,000
140,000
RM 676,000
Age Group
0-60 days
RM 582,000
2,660,000
(2,523,000)
(43,000)
RM 676,000
61-90 days
91-120 days
Over 120 days
Total
Percent
Uncollectible
3%
13
23
34
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 2024?
3-b. How would accounts receivable appear in the 2024's SOFP?
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