Reference no: EM132557007
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 2017, accounts receivable were $584,000 and the allowance account had a credit balance of $48,000. Accounts receivable activity for 2018 was as follows:
Beginning balance $584,000
Credit sales 2,670,000
Collections (2,533,000)
Write-offs (44,000)
Ending balance $677,000
The company's controller prepared the following aging summary of year-end accounts receivable:
Summary Age Group Amount Percent
Uncollectible 0-60 days $395,000 5%
61-90 days 94,000 14
91-120 days 54,000 24
Over 120 days 134,000 35
Total $677,000
Required -
1. Prepare the necessary year-end adjusting entry for bad debt expense.
2. What is total bad debt expense for 2018?