Problem 7-4A (Algo) Accounts receivable transactions and bad debts adjustments LO C1, P2, P3 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 $1,345,000 of merchandise (that had cost $984,000) on credit, terms n/30. b. Wrote off $21,700 of uncollectible accounts receivable. c. Received $674,800 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 2.30% of accounts receivable would be uncollectible. Year 2 e. Sold $1,590,800 of merchandise (that had cost $1,256,900) on credit, terms n/30. f. Wrote off $33,700 of uncollectible accounts receivable. g. Received $1,305,500 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 2.30% of accounts receivable would be uncollectible. JE Year 1 JE Year 2 Prepare journal entries to record Liang's 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.) No Transaction General Journal Debit Credit 1 e(1) Accounts receivable 1,590,800 Sales 1,590,800 2 e(2) 1,256,900 Cost of goods sold Merchandise inventory 1,256,900 3 f. Allowance for doubtful accounts 33,700 Accounts receivable 33,700 4 g. Cash 1,305,500 Accounts receivable 1,305,500 5 h. Bad debts expense 39,473 Allowance for doubtful accounts 39,473 X