Answer:
1). Account receivables A/c Dr. $1,345,000
To sales revenue A/c $1,345,000
(Being the sales revenue is recorded)
Cost of good sold A/c Dr. $975,700
To merchandise inventory A/c $975,700
(Being the cost is recorded)
2. Allowance for doubtful accounts A/c Dr. $19,400
To accounts receivable A/c $19,400
(Being the written off is recorded)
3. Cash A/c Dr. $670,800
To accounts receivables A/c $670,800
(Being cash received is recorded
1. .Account receivable A/c Dr. $1,529,400
To sales A/c $1,529,400
(Being the sales revenue is recorded)
Cost of good sold A/c Dr. $1,332,100
To merchandise inventory A/c $1,332,100
(Being the cost of goods sold is recorded)
2. Allowance for doubtful accounts A/c Dr. $27,000
To Account receivable A/c $27,000
(Being the written off amount is recorded)
3. Cash A/c Dr. $1,391,600
To account receivable A/c $1,391,600
(Being the cash received is recorded)
4. Bad-debts expense A/c Dr. $28,000
(765,600 × 1% + 20,344)
To allowance for doubtful accounts A/c $28,000
(Being the bad debt expense is recorded)
Working note:
Ending Receivables = (654800 + 1529400 - 27,000 - 1,391,600) = $765,600
Total Receivables of 1st Year = 1,345,000 - 19,400 - 670,800 = $654,800
Before Adjustment Ending Allowance Balance = 65,4800 × 1% - 27,000
= 6,548 - 27,000
= 20,344 Debit BalanceThe journal entries are shown below:
According to the scenario, computation of the given data are as follows:-
Journal Entries for 1st year
1). Account receivables A/c Dr. $1,345,000
To sales revenue A/c $1,345,000
(Being the sales revenue is recorded)
Cost of good sold A/c Dr. $975,700
To merchandise inventory A/c $975,700
(Being the cost is recorded)
2. Allowance for doubtful accounts A/c Dr. $19,400
To accounts receivable A/c $19,400
(Being the written off is recorded)
3. Cash A/c Dr. $670,800
To accounts receivables A/c $670,800
(Being cash received is recorded)
4. Bad-debts expense A/c Dr. $38,389
(1,345,000-19,400-670,800) × 2.90+ $19,400
To allowance for doubtful accounts A/c $38,389
(Being the bad debt expense is recorded)
Journal Entries for 2nd year
1. .Account receivable A/c Dr. $1,529,400
To sales A/c $1,529,400
(Being the sales revenue is recorded)
Cost of good sold A/c Dr. $1,332,100
To merchandise inventory A/c $1,332,100
(Being the cost of goods sold is recorded)
2. Allowance for doubtful accounts A/c Dr. $27,000
To Account receivable A/c $27,000
(Being the written off amount is recorded)
3. Cash A/c Dr. $1,391,600
To account receivable A/c $1,391,600
(Being the cash received is recorded)
4. Bad-debts expense A/c Dr. $28,000
(765,600 × 1% + 20,344)
To allowance for doubtful accounts A/c $28,000
(Being the bad debt expense is recorded)
Working note:
Ending Receivables = (654800 + 1529400 - 27,000 - 1,391,600) = $765,600
Total Receivables of 1st Year = 1,345,000 - 19,400 - 670,800 = $654,800
Before Adjustment Ending Allowance Balance = 65,4800 × 1% - 27,000
= 6,548 - 27,000
= 20,344 Debit Balance
Explanation: