Question

Complete this question by entering your answers in the tabs below. JE Year 1 JE Year 2 Prepare journal entries to record Liang's Year 1 summarized transactions and its year-end adjustments to record bad debts (The company uses the perpetual inventory system and it applies the allowance method for its accounts receivable.) View transaction list Journal entry worksheet 2 3 4 5 Sold $1,351,600 of merchandise on credit, terms n/30. Note: Enter debits before credits. Transaction General Journal Debit Credit a(1) Record entry Clear entry View general journal

Liang Company began operations in Year 1. 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.

Year 1

1. Sold $1,351,600 of merchandise (that had cost $976,800) on credit, terms n/30.
2. Wrote off $21,500 of uncollectible accounts receivable.
3. Received $669,700 cash in payment of accounts receivable.
4. In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible.

Year 2

5. Sold $1,556,800 of merchandise (that had cost $1,323,500) on credit, terms n/30.
6. Wrote off $32,000 of uncollectible accounts receivable.
7. Received $1,288,900 cash in payment of accounts receivable.
8. In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible.

  
Required:
Prepare journal entries to record Liang’s Year 1 and Year 2 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.)
  

Answer 1

Year 1:

	Account title and Explanation	Debit	Credit
a(1)	Accounts receivable	$1,351,600
	Sales revenue		$1,351,600
	[To record credit sales]
a(2)	Cost of goods sold	$976,800
	Inventory		$976,800
	[To record cost of goods sold]
b	Allowance for doubtful accounts	$21,500
	Accounts receivable		$21,500
	[To record written off of uncollectibles]
c	Cash	$669,700
	Accounts receivable		$669,700
	[To record collections from customers]
d	Bad debt expense	$34,708
	Allowance for doubtful accounts		$34,708
	[To record bad debt expense]

Calculations:

Accounts receivable, Beginning	$0
Credit sales	$1,351,600
Written off	($21,500)
Cash received	($669,700)
Accounts receivable, Ending	$660,400
Allowance for doubtful accounts, Ending [660,400 x 2%]	$13,208
Written off	$21,500
Allowance for doubtful accounts, Beginning	$0
Bad debt expense	$34,708

Year 2:

	Account title and Explanation	Debit	Credit
a(1)	Accounts receivable	$1,556,800
	Sales revenue		$1,556,800
	[To record credit sales]
a(2)	Cost of goods sold	$1,323,500
	Inventory		$1,323,500
	[To record cost of goods sold]
b	Allowance for doubtful accounts	$32,000
	Accounts receivable		$32,000
	[To record written off of uncollectibles]
c	Cash	$1,288,900
	Accounts receivable		$1,288,900
	[To record collections from customers]
d	Bad debt expense	$23,510
	Allowance for doubtful accounts		$2,350
	[To record bad debt expense]

Calculations:

Accounts receivable, Beginning	$660,400
Credit sales	$1,556,800
Written off	($32,000)
Cash received	($1,288,900)
Accounts receivable, Ending	$235,900
Allowance for doubtful accounts, Ending [235,900 x 2%]	$4,718
Written off	$32,000
Allowance for doubtful accounts, Beginning	($13,208)
Bad debt expense	$23,510