Question

prepare general journal entries

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 $1,348,200 of merchandise (that had cost $982700) on credit, terms n/30. b. Wrote off $19,100 of uncollectible accounts receivable. c. Received $671,900 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 130% of accounts receivable would be uncollectible. Year 2 e. Sold $1,528,300 of merchandise (that had cost $1,308,300) on credit, terms n/30 f. Wrote off $27,500 of uncollectible accounts receivable. g. Received $1,384,200 cash in payment of accounts receivable, h. In adjusting the accounts on December 31, the company estimated that 130% 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)

year one

year 2

Answer 1

Transaction credit ali) Debit $1,348,200 General Journal Accounts Receivable Sales (to record sales $1,348,200 a(2) $982,700 cost of goods sold Merchandise Inventory (to record cost of goods sold) $982700 $ 19,100 Allowance for doubtful accounts Accounts Receivable to record uncollectible accounts receivable) $ 19,100 $671,900 Cash Accounts Receivable to seard cash received) & 671,900 Bad debts expense . $27,644 Allowance for doubtful accounts to record bad debts expense) $27,644

Transaction e(1) General Journal Accounts Receivable Sales Yo record sales Debit Credit $1,528,300 $1,528,300 e (2) $1,308,300 cost of goods sold Merchandise Inventory (Yo record cost of goods sold) $1,308,300 Allowance for doubtful Accounts $27,500 Accounts Receivable (to secold allowance for doubtful accounts $ 27,500 g $1,384,200 Cash Accounts Receivable (to record cash received) $1,384,200 hi Bad Debts expense $29,016 Allowance for doubtful accounts ( 40 second bad debts expense $29,016

Calculation Year 1: (d, Adjustment to the allowancez (Required ending allowance + Unadjusted Balances Firstly, calculate required ending allowance Required ending allowance = (Credit sales - collections - write offs) * Percent Uncollectible ( $1,348,200 - $ 671,900 - $19,100) x 1.307. $657,200 x 1.307 $ 8,543.6 or $8,544 Now, Adjustment to the allowance = $8,544+ $19,100 $27,644 Year 2: in Adjustment to the allowance = (Required ending allowance + Unadjusted Balance) Required ending allowance = (credit sales - Collections - Write offs) x Percent Uncollectible = ($1,528,300 - $1,384,200 - $27,500) * 1-30% $ 116,600 x 1.30% = $1,515.8 or $1,516 Now, Adjustment to the allowance = $1,516 + $27,500 = $ 29,016