Question

Problem 9-4A Accounts receivable transactions and bad debts adjustments LO C1, P2, P3

Liang Company began operations on January 1, 2016. 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.

2016

Sold $1,347,400 of merchandise (that had cost $975,400) on credit, terms n/30.

Wrote off $20,900 of uncollectible accounts receivable.

Received $665,400 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 2.70% of accounts receivable will be uncollectible.

2017

Sold $1,532,600 of merchandise (that had cost $1,269,300) on credit, terms n/30.

Wrote off $27,500 of uncollectible accounts receivable.

Received $1,248,700 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 2.70% of accounts receivable will be uncollectible.

  
Required:
Prepare journal entries to record Liang’s 2016 and 2017 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 :

Date	account and explanation	debit	credit
	Account receivable	1347400
	Sales revenue		1347400
	(To record sales)
	Cost of goods sold	975400
	Inventory		975400
	(To record cost of goods sold)
	Allowance for doubtful accounts	20900
	Account receivable		20900
	(To record write off)
	Cash	665400
	Account receivable		665400
	(To record cash collection)
	Bad debt expense (17850+20900)	38750
	Allowance for doubtful accounts		38750
	(To record bad debt expense)
	Account receivable	1532600
	Sales revenue		1532600
	(To record sales)
	Cost of goods sold	1269300
	Inventory		1269300
	(To record cost)
	Allowance for doubtful accounts	27500
	Account receivable		27500
	(To record write off)
	Cash	1248700
	Account receivable		1248700
	(To record cash collection0
	Bad debt expense (917500*2.7%+9650)	34423
	Allowance for doubtful accounts		34423
	(To record bad debt )