Liang Company began operations on January 1, 2015. During its first two years, t
ID: 2539160 • Letter: L
Question
Liang Company began operations on January 1, 2015. 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.
2015
Sold $1,350,300 of merchandise (that had cost $975,800) on credit, terms n/30.
Wrote off $19,300 of uncollectible accounts receivable.
Received $671,600 cash in payment of accounts receivable.
In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
2016
Sold $1,513,800 of merchandise (that had cost $1,303,100) on credit, terms n/30.
Wrote off $32,600 of uncollectible accounts receivable.
Received $1,114,000 cash in payment of accounts receivable.
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 Liang’s 2015 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.)
Prepare journal entries to record Liang’s 2016 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.)
Explanation / Answer
Beginning accounts receivable 0 Net credit sales 1350300 1350300 Cash received -671600 Accounts written off -19300 Ending accounts receivable 659400 Ending accounts receivable 659400 Percentage uncollected 1.10% Ending allowance for doubtful accounts 7253 2015 1 Allowance for dobtful accounts 19300 Accounts receivable 19300 2 Bad debt expense 26553 (7253+19300) Allowance for doubtful accounts 26553 2016 Beginning accounts receivable 659400 Net credit sales 1513800 2173200 Cash received -1114000 Accounts written off -32600 Ending accounts receivable 1026600 Ending accounts receivable 1026600 Percentage uncollected 1.10% Ending allowance for doubtful accounts 11293 4 Ending allowance for doubtful accounts 11293 Add Accounts receivable written off 32600 43893 Less Beginning allowance for douvtful accounts 7253 Bad debt expense 36639 2016 1 Allowance for dobtful accounts 32600 Accounts receivable 32600 2 Bad debt expense 36639 Allowance for doubtful accounts 36639
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