Question

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 a. Sold $1,349,900 of merchandise (that had cost $977,500) on credit, terms n/30. b. Wrote off $18,600 of uncollectible accounts receivable. c. Received $666,500 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible. Year 2 e. Sold $1,557,800 of merchandise (that had cost $1,335,500) on credit, terms n/30. f. Wrote off $32,100 of uncollectible accounts receivable. g. Received $1,236,200 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible.

Answer 1

Transaction aly - General Journal Accounts Receivable Sales (To record sales) Debit credit $1,349,900 $1,349,900 a(2) cost of goods sold Merchandise Inventory (To record cost of goods sold $977,500 $977,500 B. $ 18,600 $ 18,600 Allowance for doubtful accounts Accounts Receivable (To record uncollectible accounts receivable) $666,500 Cash Accounts To record Receivable cash received) $666,500 $31,896 ol Bad debts expense Allowance for doubtful accounts (To record bad debts expense) $31,896

Transaction General Journal els) Accounts Receivable Sales (To record sales) Debit I credit $1,557,800 $1,557,000 e(2) Cost of goods sold Merchandise Inventory (To record cost of goods sold) $1,335,500 $1,335,500 f. $32,100 Allowance for doubtful accounts Accounts Receivable (To record allowance for doubtful accounts) $32,100 Cash Accounts Receivable (To record cash received) $1, 236, 200 $1,236,200 $ 37,890 hi $ 35,890 Bad debts expense Allowance for doubtful accounts |(To record bad debts expense)

Calculation Year 1: (as Adjustment to the allowance = Required ending allowance + Unadjusted Balance firstly, we will calculate required ending allowance Required Ending Allowance - Credit sales - Collections - Write-offs) x percent. Uncollectible) = ($ 1,349,900 - $666,500 - $18,600) x 2 % = $ 664,000 x 2% - $ 13, 296 Now, Adjustment to the allowance = $13,296 + $ 18,600 = $31,096 Year 2: ih, Adjustment to the allowance = Required ending allowance of Unad justed Balance Required Ending Allowance = (Credit sales - collections - Write offs) x Percent uncollectible - ($ 1,557,800 - $1,236,200 - $32,100) x2% = $289,500 x 2% = $5,790 Adjustment to the allowance = $5,790 + $32,100 - $37,890