Question

Q1

[The following information applies to the questions displayed below.]

At year-end December 31, Chan Company estimates its bad debts as 0.40% of its annual credit sales of $759,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $380 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Prepare Chan's journal entries to record the transactions of December 31, February 1, and June 5.

Q2

Liang Company began operations in Year 1. 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.

Year 1

1. Sold $1,351,400 of merchandise (that had cost $981,600) on credit, terms n/30.
2. Wrote off $20,400 of uncollectible accounts receivable.
3. Received $667,900 cash in payment of accounts receivable.
4. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable would be uncollectible.

Year 2

5. Sold $1,587,000 of merchandise (that had cost $1,251,700) on credit, terms n/30.
6. Wrote off $33,300 of uncollectible accounts receivable.
7. Received $1,374,300 cash in payment of accounts receivable.
8. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable would be uncollectible.

Required:
Prepare journal entries to record Liang’s Year 1 and Year 2 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.)

Prepare Chan's journal entries to record the transactions of December 31, February 1, and June 5.

Please and thank you! my last two problems in accounting!

Answer 1

1. Chan's journal entries

Date		Particulars			Amount	Amount
31-Dec		Bad Debt Account	Dr		3036.00
		Accounts Receivable Account		Cr		3036.00
		( being 0.40% of credit sales written off as debt)
1-Feb		Bad Debt Account	Dr		380.00
		Accounts Receivable Account		Cr		380.00
		(Being dues from P.Park written off as bad debt)
		or
		If alternatively P. Parks account is maintained separately
		Bad Debt Account	Dr		380.00
		P. Park Account		Cr		380.00
5-Jun		Cash Account	Dr		380.00
		Bad Debt Recovered account		Cr		380.00
		(being bad debts already written off received )

At the end of the year The "Bad Debts Recovered Account" is transferred to the Income and Expenditure account.

2.Liang Company

Year 1

Date		Particulars			Amount	Amount
a.		Accounts Receivable account	Dr		1,351,400.00
		Credit Sales		Cr		1,351,400.00
		( being credit sales recorded)
b.		Bad Debt account	Dr		20,400.00
		Accounts Receivable account		Cr		20,400.00
		(Being uncollectible dues written off as bad debt)
c.		Cash Account	Dr		667,900.00
		Accounts Receivable account		Cr		667,900.00
		(being payment received from the debtors)
31/12		Provision for Bad and Doubtful Debts (Notes)	Dr		7,294.10
		Accounts Receivable account		Cr		7,294.10
		(being provision created for the doubtful debts)

Notes

Accounts Receivable account Balance	Amount
Opening	0
Add : Current Year Credit Sales	1,351,400.00
Less : Payemts Received during the year	(667,900.00)
Less : Badt debts written off during the year	(20,400.00)
Balance	663,100.00
Less : Amount estimated to be uncollectible (1.1% of $663,100)	(7,294.10)
Clossing Balance	$ 655,805.90

Year 2

Date		Particulars			Amount	Amount
a		Accounts Receivable account	Dr		1,587,000.00
		Credit Sales		Cr		1,587,000.00
		( being credit sales recorded)
b		Bad Debt account	Dr		33,300.00
		Accounts Receivable account		Cr		33,300.00
		(Being uncollectible dues written off as bad debt)
c		Cash Account	Dr		1,374,300.00
		Accounts Receivable account		Cr		1,374,300.00
		(being payment received from the debtors)
31/12		Provision for Bad and Doubtful Debts ( Notes)	Dr		(9,187.26)
		Accounts Receivable account		Cr		(9,187.26)
		(being provision created for the doubtful debts)

Notes :

Accounts Receivable account Balance	Amount
Opening	655,805.90
Add : Current Year Credit Sales	1,587,000.00
Less : Payments Received during the year	(1,374,300.00)
Less : Badt debts written off during the year	(33,300.00)
Balance	835,205.90
Less : Amount estimated to be uncollectible (1.1% of 835,205.90)	(9,187.26)
Clossing Balance	826,018.64