Question

Problem 9-4A 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 a. Sold $1,347,300 of merchandise (that had cost $982,000) on credit, terms n/30. b. Wrote off $20,700 of uncollectible accounts receivable. c. Received $671,400 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 2.20% of accounts receivable will be uncollectible. 2017 e. Sold $1,530,600 of merchandise (that had cost $1,278,800) on credit, terms n/30. f. Wrote off $34,300 of uncollectible accounts receivable. g. Received $1,252,600 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 2.20% 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.) Complete this question by entering your answers in the tabs below.

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Answer 1

Iransaction a (1) General Journal Accounts Receivable Debit I credit $1,347,300 $1,347,300 Sales (To record sales) a(2) $982,000 Cost of goods sold Merchandise Inventory (To record cost of goods sold) $982,000 b. $20,700 Allowance for doubtful accounts Accounts Receivable To record uncollectible accounts receivable) $ 20,700 $671,400 Cash Accounts (To record Receivable cash received) $671,400 $35, 114 Bad debts expense Allowance for doubtful accounts (To record bad debts expenpe) $ 35,114

transaction eli) General Journal Accounts Receivable Debit credit $1,530,600 $1,530,600 Sales (To record sales) e(2) $1,278,800 Cost of goods sold. Merchandise Inventory (To record cost of goods sold) $1,278,800 $34,300 Allowance for doubtful accounts Accounts Receivable (To record allowance for doubtful accounts) $34,300 Cash Accounts Receivable (To record cash received) $1,252,600 $1,252,600 ho Bad debts expense $39, 661 Allowance for doubtful accounts (To record bad debts expense) | $39,661

Calculation: 2016: (d, Adjustment to the allowance =(Required ending allowance & Un adjusted Balance) Required Ending Allowance = (credit sales - collections -Write offs) x percent Uncollectible = ($1,347,300 - $671,400 - $20,700) × 2.20% = $655,200 x 2.20% - $ 14,414 How, Adjustment to the allowance = $14,414+ $20,700 = $35,114 2017: ch Adjustment to the allowance = (Required ending allowance t Unadjusted Balance) Required Ending Allowance = (credit sales - collections - Write offs) x Percent Uncollectible = ($1,530,600 - $1,252,600 - $34,300) x 2,20% - $243,700 X 2.20% I $5,361 Now, Adjustment to the allowance = $5,361+ $34 20 1300 = $ 39,661