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:

Answer 1

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Answer 2

2016

• Sold $1,353,000 of merchandise (that had cost $978,400) on credit, terms n/30.
• Wrote off $20,100 of uncollectible accounts receivable.
• Received $667,800 cash in payment of accounts receivable.
• In adjusting the accounts on December 31, the company estimated that 1.90% of accounts receivable will be uncollectible.

2017

• Sold $1,536,200 of merchandise (that had cost $1,333,600) on credit, terms n/30.
• Wrote off $32,700 of uncollectible accounts receivable.
• Received $1,305,600 cash in payment of accounts receivable.
• In adjusting the accounts on December 31, the company estimated that 1.90% 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.

Answer:

2016

• Dr Accounts receivables 1,353,000
• Cr Sales revenue 1,353,000

• Dr Bad debt expense 20,100
• Cr Accounts receivable 20,100

• Dr Cash 667,800
• Cr Accounts receivable 667,800

• Dr Allowance for doubtful accounts 12,639
• Cr Accounts receivable 12,639

2017

• Dr Accounts receivable 1,536,200
• Cr Sales revenue 1,536,200

• Dr Bad debt expense 32,700
• Cr Accounts receivable 32,700

• Dr Cash 1,305,600
• Cr Accounts receivable 1,305,600

• Dr Allowance for doubtful accounts 3,760
• Cr Accounts receivable 3,760