Answer and Explanation:
The Journal entry is shown below:-
1. a Accounts receivable Dr, $1,348,400
To Sales $1,348,400
(Being sales revenue is recorded)
b. Cost of good sold Dr, $975,100
To Merchandise inventory $975,100
(Being cost of goods sold is recorded)
2. Allowance for doubtful accounts Dr, $19,900
To Accounts receivable $19,900
(Being allowance for doubtful debt is recorded)
3. Cash Dr, $671,100
To Accounts receivable $671,100
(Being cash receipt is recorded)
4. Bad debts expense Dr, $39,622
($1,348,400 - $671,100 - $19,900) × 3% + $19,900
To Allowance for doubtful accounts $39,622
(Being bad debt expense is recorded)
5. a. Accounts receivable Dr, $1,500,700
To Sales $1,500,700
(Being sales revenue is recorded)
b. Cost of good sold Dr, $1,343,400
To Merchandise inventory $1,343,400
(Being cost of goods sold is recorded)
6. Allowance for doubtful accounts Dr, $28,700
To Accounts receivable $28,700
(Being allowance for doubtful debts is recorded)
7. Cash Dr, $1,157,400
To Accounts receivable $1,157,400
(Being cash receipts is recorded)
8. Bad debts expense Dr, $38,138 ($972,000 × 3%) + $8,978
To Allowance for doubtful accounts $38,138
(Being bad debt expense is recorded)
Working note
Ending receivables
= (Sale value of merchandise - written off amount - received cash) + year 2 Sale value of merchandise - year 2 written off amount - year 2 received cash
= ($1,348,400 - $19,900 - $671,100) + $1,500,700 - $28,700 - $1,157,400
= $657,400 + $1,500,700 - $28,700 - $1,157,400
= $972,000
Ending allowance balance before adjustment
= ($657,400 × 3%) - $28,700
= $8,978 balance of debit
