Question

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 $1,349,000 of merchandise (that had cost $983,000) on credit, terms 1/30. b. Wrote of $19,300 of uncollectible accounts receivable c. Received $670,400 cash in payment of accounts receivable, d. In adjusting the accounts on December 31, the company estimated that 140% of accounts receivable will be uncollectible 2017 e. Sold $1,530,500 of merchandise (that had cost $1,253,500) on credit, terms n/30. Wrote of $29,800 of uncollectible accounts receivable. g. Received $1,196,800 cash in payment of accounts receivable h. In adjusting the accounts on December 31, the company estimated that 1,40% of accounts receivable will be uncollectible. Required: Prepare journal entries to record Liang's 2016 and 2017 summarized transactions and its year and 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. 2016 JE 2017

Answer 1

Credit Transaction General Journal aly Accounts Receivable sales (To record sales) Debit $1,349.00 $1,349,000 a(2) $983,000 cost of goods sold Merchandise Inventory (To record cost of goods $983,000 sold) & 19,300 bu Allowance for doubtful accounts Accounts Receivable To record uncollectible accounts receivable) $ 19,300 $ 670, 400 Cash Accounts Receivable (To record cash received) $670,400 $ 28,530 Bad debts expense Allowance for doubtful accounts I(To record bad debts expense) $28,530

Transaction General Journal e (1) Accounts Receivable Sales (To record sales) Debit credit $1,530, 600 $1,530,600 e (2) $1,253,500 Cost of goods sold Merchandise Inventory (To record cost of goods sold) $1,253,500 of $29,800 $29,800 Allowance for doubtful accounts Accounts Receivable (To record allowance for doubtful accounts) $1,196,800 cash Accounts Receivable L(To record cash received) $1,196,800 $ 34,056 Bad debts expense Allowance for doubtful accounts (To record bad debts expense) $34,056

Calculation: 2016: (d, Adjustment to the allowance = Required ending allowance & Unadjusted Balance firstly, calculate required ending allowance Required Ending Allowance = (Credit sales - Collections - Write-offs ) x percent uncollectible = ($1,349,000 - $670,400 - $19,300) x 1:40% = $659,300 x 1.40% = $ 9,230 Now, Adjustment to the allowance = $9,230+ $19,300 = $28,530 2017: ch Adjustment to the allowance = Required ending allowance & Unadjusted Balance Required Ending Allowance = (Credit sales - Collections - Write-offs) x Percent Uncollectible = ($1,530,600 - $1,196,800 - $29,800 x 1.40% = $304,000 X 1.40% = $4,256 Now, Adjustment to the allowance = $4,256 + $ 29800 = $34,056