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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
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
- Sold $1,351,300 of merchandise on credit (that had cost $976,300), terms n/30.
- Wrote off $21,500 of uncollectible accounts receivable.
- Received $674,600 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible.
Year 2
- Sold $1,568,600 of merchandise (that had cost $1,320,800) on credit, terms n/30.
- Wrote off $28,700 of uncollectible accounts receivable.
- Received $1,242,600 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 2.00% of accounts receivable would be uncollectible.
Required:
Prepare journal entries to record Liangs 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.)
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