Lopez Company began operations on January 1, 2010. During its first two years, t
ID: 2384757 • Letter: L
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 $1,345,600 of merchandise (that had cost $979,400) on credit, terms n/30.
b. Wrote off $19,300 of uncollectible accounts receivable.
c. Received $667,500 cash in payment of accounts receivable.
d. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
2011
e. Sold $1,545,000 of merchandise (that had cost $1,259,800) on credit, terms n/30.
f. Wrote off $32,800 of uncollectible accounts receivable.
g. Received $1,171,400 cash in payment of accounts receivable.
h. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
Required:
Prepare journal entries to record Lopez’s 2010 and 2011 summarized transactions and its year-end adjustments to record bad debts expense. (The company uses the perpetual inventory system.) (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Explanation / Answer
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 $1,345,600 of merchandise (that had cost $979,400) on credit, terms n/30.
Debit: Accounts Receivable 1,345,600
Credit: Sales 1,345,600
Debit: Cost of Goods Sold 979,400
Credit: Merchandise Inventory 979,400
b. Wrote off $19,300 of uncollectible accounts receivable.
Debit: Allowance for Doubtful Accounts 19,300
Credit: Accounts Receivable 19,300
c. Received $667,500 cash in payment of accounts receivable.
Debit: Cash 667,500
Credit: Accounts Receivable 667,500
d. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
Accounts receivable = 1,345,600 – 13,900 – 667,500 = 658,800
658,800*1.1% = 7247
Debit: Bad Debt Expense 7247
Credit: Allowance for Doubtful Accounts 7247
2011
e. Sold $1,545,000 of merchandise (that had cost $1,259,800) on credit, terms n/30.
Debit: Accounts Receivable 1,545,000
Credit: Sales 1,545,000
Debit: Cost of Goods sold 1,259,800
Credit: Merchandise Inventory 1,259,800
f. Wrote off $32,800 of uncollectible accounts receivable.
Debit: Allowance for doubtful accounts 32,800
Credit: Accounts receivable 32,800
g. Received $1,171,400 cash in payment of accounts receivable.
Debit: Cash 1,171,400
Credit: Accounts Receivable 1,171,400
h. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
Accounts receivable = 658,800 + 1,545,000 – 1,171,400 – 32,800 = 999,600
999,660*1.1% = 10,996
Debit: Bad Debt Expense 10,996
Credit: Allowance for doubtful accounts 10,996
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