Question
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 $1,352,700 of merchandise on credit (that had cost $975,000), terms n/30.
- Wrote off $18,500 of uncollectible accounts receivable.
- Received $673,700 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 2.80% of accounts receivable would be uncollectible.
Year 2
- Sold $1,534,000 of merchandise (that had cost $1,257,100) on credit, terms n/30.
- Wrote off $30,000 of uncollectible accounts receivable.
- Received $1,214,800 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 2.80% 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.)
Note: Round your intermediate calculations to the nearest dollar.
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