Lopez Company began operations on January 1, 2010. During its first two years, t

Question

Lopez Company began operations 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 had cost $1,450,000) 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. Required: Prepare journal entries to record Lopez

Explanation / Answer

2010 a. Sold $1,803,750 of merchandise (that had cost $1,475,000) on credit, terms n/30 Dr Accounts receivable (AR) $1,803,750 Cr Sales $1,803,750 Dr COGS $1,475,000 Cr Merchandise inventory (MI) $1,475,000 b. Wrote off $20,300 of uncollectible accounts receivable. Dr Allowance for Doubtful Accounts (ADA) $20,300 Cr AR $20,300 c. Received $789,200 cash in payment of accounts receivable Dr Cash $789,200 Cr AR $789,200 d. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible. Dr Bad debts expense $35,213.75 Cr ADA $35,213.75 2011 e. Sold $1,825,700 of merchandise (that had cost $1,450,000) on credit, terms n/30 Dr AR $1,825,700 Cr Sales $1,825,700 Dr COGS $1,450,000 Cr MI $1,450,000 f. Wrote off $28,800 of uncollectible accounts receivable Dr ADA $28,800 Cr AR $28,800 g. Received $1,304,800 cash in payment of accounts receivable Dr CAsh $1,304,800 Cr AR $1,304,800 h. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable will be uncollectible. Dr Bad debts expense 36,181.50 Cr ADA 36,181.50 Movements in AR 2010 Sales $1,803,750 - Write-off $20,300 - Collections $789,200 = Ending balance $994,250; 1.5% = $14,913.75 2011 Beginning bal. $994,250 + Sales $1,825,700 - Write-off $28,800 - Collections $1,304,800 = Ending bal. $1,486,350; 1.5% = $22,295.25 Movements in ADA 2010 Write-off $20,300 (Debit) Journal entry $35,213.75 (Credit) = Ending bal. $14,913.75 (Credit) 2011 Beginning bal. $14,913.75 (Credit) - Write-off $28,800 (Debit) + Journal entry $36,181.50 (Credit) = Ending bal. $22,295.25

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