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 $602,000 and the allowance account had a credit balance of $66,000. Accounts receivable activity for 2021 was as follows: Beginning balance $ 602,000 Credit sales 2,760,000 Collections (2,623,000 ) Write-offs (53,000 ) Ending balance $ 686,000 The company’s controller prepared the following aging summary of year-end accounts receivable: Summary Age Group Amount Percent Uncollectible 0−60 days $ 440,000 5 % 61−90 days 70,000 11 91−120 days 63,000 22 Over 120 days 113,000 37 Total $ 686,000 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?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Swathmore Clothing Corporation grants its customers 30 days’ credit. The company uses the allowance method for its uncollectible
At the end of 2020, accounts receivable were $602,000 and the allowance account had a credit balance of $66,000. Accounts receivable activity for 2021 was as follows:
| Beginning balance | $ | 602,000 | ||
| Credit sales | 2,760,000 | |||
| Collections | (2,623,000 | ) | ||
| Write-offs | (53,000 | ) | ||
| Ending balance | $ | 686,000 | ||
The company’s controller prepared the following aging summary of year-end accounts receivable:
| Summary | ||||
| Age Group | Amount | Percent Uncollectible | ||
| 0−60 days | $ | 440,000 | 5 | % |
| 61−90 days | 70,000 | 11 | ||
| 91−120 days | 63,000 | 22 | ||
| Over 120 days | 113,000 | 37 | ||
| Total | $ | 686,000 | ||
Required:
1. Prepare a summary
2. Prepare the necessary year-end
3-a. What is total bad debt expense for 2021?
3-b. How would accounts receivable appear in the 2021
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