Question

Liang Company began operations on January 1, 2017. 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.2017a. Sold $1,347,100 of merchandise (that had cost $983,600) on credit, terms n/30.b. Wrote off $21,100 of uncollectible accounts receivable.c. Received $667,400 cash in payment of accounts receivable.d. In adjusting the accounts on December 31, the company estimated that 2.50% of accounts receivable will be uncollectible.2018e. Sold $1,501,200 of merchandise on credit (that had cost $1,291,000), terms n/30.f. Wrote off $28,100 of uncollectible accounts receivable.g. Received $1,282,100 cash in payment of accounts receivable.h. In adjusting the accounts on December 31, the company estimated that 2.50% of accounts receivable will be uncollectible.Required:1. Prepare Journal entries to record Liang's 2017 and 2018 summarized transactions and its year-end adjustments to record bad debts expense.2. Prepare Journal entries to record Liang's 2017 summarized transaction and its year-end adjustment to record bad debts expenses.3. Prepare Journal entries to record Liang's 2018 summarized transactions and its year-end adjustments to record bad debts expense.

Answer 1

Answer:

journal entries for 2017:

Dr Accounts receivable 1,347,100

    Cr Sales revenue 1,347,100

Dr Cost of goods sold 983,600

    Cr Merchandise inventory 983,600

Dr Bad debt expense 21,100

    Cr Accounts receivable 21,100

Dr Cash 667,400

    Cr Accounts receivable 667,400

Dr Bad debt expense 16,465

    Cr Allowance for doubtful accounts 16,465

Ending balance of accounts receivable = $658,600

Ending balance of allowance for doubtful accounts = $16,465

Bad debt expense for the year = $37,565

journal entries for 2018:

Dr Accounts receivable 1,501,200

    Cr Sales revenue 1,501,200

Dr Cost of goods sold 1,291,000

    Cr Merchandise inventory 1,291,000

Dr Allowance for doubtful accounts 28,100

    Cr Accounts receivable 28,100

Dr Cash 1,282,100

    Cr Accounts receivable 1,282,100

Dr Bad debt expense (= 21,240 + 11,635) 32,875

    Cr Allowance for doubtful accounts 32,875

Ending balance of accounts receivable = $849,600

Ending balance of allowance for doubtful accounts = $21,240

Bad debt expense for the year = $32,875