Exercise 3-2

Prepare journal entries for the Russell Companys 2011 and 2012 transactions summarized below and the companys year-end adjustments to Bad Debts Expense. Round off all amounts to the nearest dollar.

Note: The company uses a perpetual inventory system.

Summarized Transactions

The Russell Company began operations on January 1, 2011, and completed several transactions that involved credit sales, accounts receivable collections, and bad debts.

2011

Sold merchandize that cost $1,350,000, on credit, for $1,575,000. Terms n/30.

Wrote off $18,100 of accounts receivable that were uncollectible.

Received cash in the amount of $822,500 as accounts receivables payments.

In performing year-end account adjustments, the company estimated that 2 percent of accounts receivables will not be collectible.

[Create the 2011 journal entries here.]

2012

Sold merchandize that cost $1,325,000, on credit, for $1,592,000. Terms n/30.

Wrote off $24,500 of accounts receivable that were uncollectible.

Received cash in the amount of $1,428,300 as accounts receivables payments.

In performing year-end account adjustments, the company estimated that 2 percent of accounts receivables will not be collectible.

[Create the 2012 journal entries here.]