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Problem 7-4A Accounts receivable transactions and bad debts adjustments LO C1, P2, P3 Liang Company began...

Problem 7-4A Accounts receivable transactions and bad debts adjustments LO C1, P2, P3

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:

2016

  1. Sold $1,345,434 of merchandise (that had cost $975,000) on credit, terms n/30.
  2. Wrote off $18,300 of uncollectible accounts receivable.
  3. Received $669,200 cash in payment of accounts receivable.
  4. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible.


2017

  1. Sold $1,525,634 of merchandise on credit (that had cost $1,250,000), terms n/30.
  2. Wrote off $27,800 of uncollectible accounts receivable.
  3. Received $1,204,600 cash in payment of accounts receivable.
  4. 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.)

Business   Accounting   
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Answer #1

2016 Journal entries

No General Journal Debit Credit
1 Account receivable 1345434
Sales revenue 1345434
Cost of goods sold 975000
Merchandise inventory 975000
2 Allowance for doubtful accounts 18300
Account receivable 18300
3 Cash 669200
Account receivable 669200
4 Bad debt expense (657934*1.5%+18300) 28169
Allowance for doubtful accounts 28169

2017 Journal entries

No General Journal Debit Credit
1 Account receivable 1525634
Sales revenue 1525634
Cost of goods sold 1250000
Merchandise inventory 1250000
2 Allowance for doubtful accounts 27800
Account receivable 27800
3 Cash 1204600
Account receivable 1204600
4 Bad debt expense (951168*1.5%-369) 13899
Allowance for doubtful accounts 13899
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