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%u2019s 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.

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

Explanation / Answer

a)

accounts receivable 1,803,750

       Inventory                          1,803,750

b)

Uncollectable accounts expense 20,300

      Accounts receivable                           20,300

c)

Cash   789200

     Accounts Receivable 789200

d)

Current account receivable = 1,803,750-20,300-789,200

                                                    = 994250

994250 x 0.015 = 14913.75

Allowed unreceivables 14913.75

     Accounts Receivable              14913.75

e) Accounts receivable   1,925,700

            Inventory                            1,925,700

f) Uncollectible accounts receivable 28800

            Accounts receivable                            28800

g) Cash                               1,304,800

             Accounts receivable   1,304,800

h)

Current account receivable balance = 1925700-28800-1304800

    = 592100

592100* .015= 8881.5

Allowed unreceivables   8881.5

     Accounts receivable             8881.5

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