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Liang Company began operations on January 1, 2016. During its first two years, the company completed...

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 $1,353,200 of merchandise (that had cost $984,100) on credit, terms n/30. Wrote off $18,100 of uncollectible accounts receivable. Received $669,300 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.20% of accounts receivable will be uncollectible. 2017 Sold $1,599,900 of merchandise (that had cost $1,307,500) on credit, terms n/30. Wrote off $27,000 of uncollectible accounts receivable. Received $1,308,600 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.20% 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.)

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Expert Solution

Journal entries:
Date Accounts title and explanations Debit $ Credit $
2016
a. Accounts receivable Dr. 1353200
    Sales revenue 1353200
Cost of goods sold Dr. 984100
    Merchandise inventory 984100
b. Allowance for uncollectible accounts Dr. 18100
    Accounts receivable 18100
c. Cash account Dr. 669300
      Accounts receivable 669300
d. Bad debts expenses 26090
    Allowance for uncollectible accounts 26090
Note:
Accounts receivable balance 665800
(1353200-18100-669300)
Allowance balance requirred 7989.6
(665800*1.20%)
Bad debts expense 26090
(7990+18100)
Journal entries:
Date Accounts title and explanations Debit $ Credit $
2017
a. Accounts receivable Dr. 1599900
    Sales revenue 1599900
Cost of goods sold Dr. 1307500
     Merchandise inventory 1307500
b. Allowance for uncollectible accounts Dr. 27000
    Accounts receivable 27000
c. Cash account Dr. 1308600
      Accounts receivable 1308600
d. Bad debts expenses 30184
    Allowance for uncollectible accounts 30184
Nnote:
Balance in Accounts receivable
Beginning balance 665800
Add: sales 1599900
Less: Collections -1307500
Less: Wirtten off -27000
Balance at the end 931200
Allowance for Uncollectible accounts:
Required balance (931200*1.20%) 11174.4
Less: beginning balance -7990
Add: Amount written off 27000
Bad debts expense 30184

ekkarill92 answered 1 year ago
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