Lopez Company began operation on January 1, 2010. During its first two years, th

Question

Lopez Company began operation on January 1, 2010. 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.
2010
a. Sold 1,803,750 of merchandise (that had cost 1,475,000) on credit, terms n/30
b. Wrote off 20,300 of uncollectible accounts receivable.
c. Received 789,200 cash in payment of accounts receivable.
d. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible.
2011
e. Sold 1,825,700 of merchandise (that has cost1,450,000) on credit, terms n/30
f. Wrote off 28,800 of uncollectible accounts receivable.
g. Received 1,304,800 cash in payment of accounts receivable.
h. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible.

Prepare journal entries to record Lopez’s 2010 and 2011 summarized transactions and its year-end adjustments to record bad debts expense. (The company uses the perpetual inventory system. Round amounts to the nearest dollar.)


2010 Account Titles Debit Credit
a.







b.



c.



d.



2011
e.







f.



g.



h.

Explanation / Answer

2010 Account Titles Debit Credit a. Accounts receivable $1,803,750 Sales $1,803,750 b. Bad debts $20,300 Accounts receivable $20,300 c. Cash $789,200 Accounts receivable $789,200 d. Bad debt expense $14,914 Allowance for Doubtful debts $14,914 2011 e. Accounts receivable $1,825,700 Sales $1,825,700 f. Allowance for doubtful debts $28,800 Accounts receivable $28,800 g. Cash $1,304,800 Accounts receivable $1,304,800 h. Bad debt expense $36,181 Allowance for Doubtful debts $36,181

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