Question

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 $1,345,400 of merchandise (that had cost $983,900) on credit, terms n/30.

Wrote off $18,100 of uncollectible accounts receivable.

Received $665,600 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 2.10% of accounts receivable will be uncollectible.

2017

Sold $1,590,000 of merchandise (that had cost $1,269,900) on credit, terms n/30.

Wrote off $25,300 of uncollectible accounts receivable.

Received $1,134,600 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 2.10% 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.)
(2016)

1-Sold $1,345,400 of merchandise on credit, terms n/30.

2-Record cost of goods sold, $983,900.

3-Wrote off $18,100 of uncollectible accounts receivable.

4-Received $665,600 cash in payment of accounts receivable.

5-In adjusting the accounts on December 31, the company estimated that 2.10% of accounts receivable will be uncollectible.

	Transaction General Journal Debit Credit d.

(2017)

1-Sold $1,590,000 of merchandise on credit, terms n/30.

2-Record cost of goods sold, $1,269,900.

3-Wrote off $25,300 of uncollectible accounts receivable.

4-Received $1,134,600 cash in payment of accounts receivable.

5-In adjusting the accounts on December 31, the company estimated that 2.10% of accounts receivable will be uncollectible.

	Transaction General Journal Debit Credit g.

Answer 1

• All working forms part of the answer
• Workings for Both years

	Accounts receivables	Allowance for Doubtful Accounts
	[Debit (Credit)]	[Credit (Debit)]
Beginning balance - 2016	$                          -	$                         -
2016 Sales	$          1,345,400
2016 Written off	$              (18,100)	$             (18,100)
2016 Cash collected	$            (665,600)
Ending balance - 2016	$              661,700	$             (18,100)
Adjusted ending balance - 2016	$              661,700	$                13,896
Bad Debt Expense - 2016		$                31,996
Beginning balance - 2017	$              661,700	$                13,896
2017 Sales	$          1,590,000
2017 Written off	$              (25,300)	$             (25,300)
2017 Cash collected	$        (1,134,600)
Ending balance - 2017	$          1,091,800	$             (11,404)
Adjusted ending balance - 2017	$          1,091,800	$                22,928
Bad Debt Expense - 2017		$                34,332

• 2016 Journal entries

Transaction	General Journal	Debit	Credit
a [2016]	Accounts receivables	$          1,345,400
	Sales Revenue		$          1,345,400
	(Sales recorded)
b [2016]	Cost of Goods Sold	$              983,900
	Inventory		$             983,900
	(Cost of Goods recorded)
c [2016]	Allowance for Doubtful Accounts	$                18,100
	Accounts receivables		$                18,100
	(Accounts written off)
d [2016]	Cash	$              665,600
	Accounts receivables		$             665,600
	(Cash collected)
e [2016]	Bad Debt Expense	$                31,996
	Allowance for Doubtful Accounts		$                31,996
	(Bad Debt Expense recorded)

• 2017 Journal entries

Transaction	General Journal	Debit	Credit
a [2017]	Accounts receivables	$                 1,590,000
	Sales Revenue		$        1,590,000
	(Sales recorded)
b [2017]	Cost of Goods Sold	$                 1,269,900
	Inventory		$        1,269,900
	(Cost of Goods recorded)
c [2017]	Allowance for Doubtful Accounts	$                       25,300
	Accounts receivables		$              25,300
	(Accounts written off)
d [2017]	Cash	$                 1,134,600
	Accounts receivables		$        1,134,600
	(Cash collected)
e [2017]	Bad Debt Expense	$                       34,332
	Allowance for Doubtful Accounts		$              34,332
	(Bad Debt Expense recorded)