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13 January, 04:53

2017 Sold $1,351,700 of merchandise (that had cost $981,800) on credit, terms n/30. Wrote off $21,500 of uncollectible accounts receivable. Received $670,400 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 3.00% of accounts receivable will be uncollectible. 2018 Sold $1,586,800 of merchandise on credit (that had cost $1,326,300), terms n/30. Wrote off $25,300 of uncollectible accounts receivable. Received $1,182,900 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 3.00% of accounts receivable will be uncollectible. Required: Prepare journal entries to record Liang's 2017 and 2018 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.) (Round your intermediate calculations to the nearest dollar amount.)

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  1. 13 January, 05:52
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    Answer and Explanation:

    The Journal entry is shown below:-

    1. Accounts receivable Dr, $1,351,700

    To Sales revenue $1,351,700

    (Being merchandise on credit is recorded)

    Cost of goods sold Dr, $981,800

    To Merchandise inventory $981,800

    (Being cost of goods sold is recorded)

    2. Allowance for Uncollectible accounts Dr, $21,500

    To Accounts receivable $21,500

    (Being Uncollectible accounts is receivable is recorded)

    3. Cash account Dr, $670,400

    To Accounts receivable $670,400

    (Being cash is recorded)

    4. Bad debts expenses Dr, $41,294

    To Allowance for uncollectible accounts $41,294

    (Being bad debt expenses is recorded)

    Working Note

    Accounts receivable ($1,351,700 - $21,500 - $670,400) $659,800

    Required balance 3% $19,794

    Add: Debit balance $21,500

    Bad debt expenses $41,294

    5. Accounts receivable Dr, $1,586,800

    To Sales revenue $1,586,800

    (Being merchandise on credit is recorded)

    Cost of goods sold Dr, $1,326,300

    To Merchandise inventory $1,326,300

    (Being cost of goods sold is recorded)

    6. Allowance for Uncollectible accounts Dr, $25,300

    To Accounts receivable $25,300

    (Being uncollectible accounts receivable is recorded)

    7. Cash account Dr,$1,182,900

    To Accounts receivable $1,182,900

    (Being cash is recorded)

    8. Bad debts expenses Dr, $36,658

    To Allowance for uncollectible accounts $36,658

    (Being bad debt expenses is recorded)

    Working Note

    Accounts receivable-Gross $659,800

    Add: Sales $1,586,800

    Less: Collections $1,182,900

    Less: Amount write off $25,300

    Balance $1,038,400

    Required balance 3% $31,152

    Allowance Balance $19,794

    Less: Amount written off $25,300

    Debit balance $5,506

    Add: Required balance $31,152

    Bad debts expenses $36,658
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