Question

Liang Company began operations on January 1, 2017. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows.

2017

Sold $1,348,400 of merchandise (that had cost $984,500) on credit, terms n/30.

Wrote off $18,400 of uncollectible accounts receivable.

Received $670,200 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 1.30% of accounts receivable will be uncollectible.

2018

Sold $1,516,800 of merchandise on credit (that had cost $1,347,100), terms n/30.

Wrote off $32,000 of uncollectible accounts receivable.

Received $1,302,100 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 1.30% of accounts receivable will be uncollectible.

Required:

Prepare journal entries to record Liang’s 2017 and 2018 summarized transactions and its year-end adjustments to record bad debts expense. (The company uses the perpetual inventory system and it applies the allowance method for its accounts receivable.) (Round your intermediate calculations to the nearest dollar amount.)

Answer 1

Journal entries:								Journal entries:
Date	Accounts title and explantion				Debit $	Credit $		Date	Accounts title and explantion				Debit $	Credit $
2017	Accounts receivable				1348400			2018	Accounts receivable				1516800
	Sales revenue					1348400			Sales revenue					1516800
	Cost of goods sold				984500				Cost of goods sold				1347100
	Merchandise inventory					984500			Merchandise inventory					1347100
	Allowance for doubtful accounts				18400				Allowance for doubtful accounts				32000
	Accounts receivable					18400			Accounts receivable					32000
	Cash account				670200				Cash account				1302100
	Accounts receivable					670200			Accounts receivable					1302100
	Bad debts expenses				26977.4				Bad debts expenses				34375
	Allowance for Doubtful accounts					26977.4			Allowance for Doubtful accounts					34375
Note:;									Note:
Credit sales			1348400						Beginning Balance of AR			659800
Less: Amount written ff			-18400						Credit sales			1516800
Less: Cash collected			-670200						Less: Amount written ff			-32000
Accounts receivable at the end			659800						Less: Cash collected			-1302100
Allowance required @ 1.30%			8577.4						Accounts receivable at the end			842500
Add: Amount written ff			18400						Allowance required @ 1.30%			10952.5
Bad debts expensnes			26977.4						Actual balance of Allowance			8577.4
									Additional amount ot create			2375.1
									Add: Amount written ff			32000
									Bad debts expensnes			34375.1