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:2016a. Sold $1,345,434 of merchandise (that had cost $975,000) on credit, terms n/30.b. Wrote off $18,300 of uncollectible accounts receivable.c. Received $669,200 cash in payment of accounts receivable.d. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible.2017a. Sold $1,525,634 of merchandise on credit (that had cost $1,250,000), terms n/30.b. Wrote off $27,800 of uncollectible accounts receivable.c. Received $1,204,600 cash in payment of accounts receivable.d. In adjusting the accounts on December 31, the company estimated that 1.5% 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.)

Answer 1

Answer:

Journal Entries to Record 2016 Transactions

Account Receivacble Debit     1,345,434$

Sales Credit                               1,345,434$

Cost of Good Sold Debit            975,000$

Inventory Credit                           975,000$

Bad Debt Expense Debit             18,300$

Account Receivable Credit          18,300$

Cash Debit                                     669,299$

Account Receivable Credit           669,299$

Bad Debt expense Debit               986,901$

Provision Liability  Credit               986,901$

(1345343-18300-669200)*1.5%

Journal Entries to Record 2017 Transactions

Account Receivacble Debit     1,525,634$

Sales Credit                              1,525,634$

Cost of Good Sold Debit           1.250,000$

Inventory Credit                          1.250,000$

Bad Debt Expense Debit             27,800$

Account Receivable Credit          27,800$

Cash Debit                                     1,204,600$

Account Receivable Credit           1,204,600$

Bad Debt expense Debit                4,399$

Provision Liability  Credit                4,399$

(1525634-27800-1204600)*1.5%

Based on information provided in the question above entries will be passed.

*It is assumed that bad debt written off relates to same year sales.