Liang Company began operations on January 1, 2016. During its first two years, t
ID: 2539562 • Letter: L
Question
Liang Company began operations on January 1, 2016. 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. 2016 a. Sold $1,346,800 of merchandise (that had cost $978,600) on credit, terms n/30. b. Wrote off $20,700 of uncollectible accounts receivable. c. Received $668,000 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible. 2017 e. Sold $1,590,000 of merchandise (that had cost $1,256,200) on credit, terms n/30. f. Wrote off $27,900 of uncollectible accounts receivable g. Received $1,224,200 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible. Required: Prepare journal entries to record Liang's 2016 and 2017 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
Journal entries
date
explanation
debit
credit
2016
a
accounts receivables
1346800
accounts receivable
1346800
sales
1346800
collection
-668000
write off
-20700
a
cost of goods sold
978600
ending receivables
658100
inventory
978600
required ending balance in allowance for doubtful debts
658100*1.7%
11187.7
b
allowance for doubtful debts
20700
unadjusted balance
20700
accounts receivables
20700
adjustment to the allowance for doubtful debts
31887.7
c
cash
668000
accounts receivables
668000
d
bad debt expense
31887.7
allowance for doubtful debts
31887.7
2017
2017
a
accounts receivables
1590000
opening balance
658100
sales
1590000
accounts receivable
1590000
collection
-1224200
a
cost of goods sold
1256200
write off
-27900
inventory
1256200
ending receivables
996000
b
allowance for doubtful debts
27900
required ending balance in allowance for doubtful debts
999600*1.7%
16993
accounts receivables
27900
unadjusted balance
(beginning balance) cr
31887.7
c
cash
1224200
write off (dr)
-27900
3988
accounts receivables
1224200
adjustment to allowance for doubtful debts
13005.00
d
bad debt expense
13005
allowance for doubtful debts
13005
Journal entries
date
explanation
debit
credit
2016
a
accounts receivables
1346800
accounts receivable
1346800
sales
1346800
collection
-668000
write off
-20700
a
cost of goods sold
978600
ending receivables
658100
inventory
978600
required ending balance in allowance for doubtful debts
658100*1.7%
11187.7
b
allowance for doubtful debts
20700
unadjusted balance
20700
accounts receivables
20700
adjustment to the allowance for doubtful debts
31887.7
c
cash
668000
accounts receivables
668000
d
bad debt expense
31887.7
allowance for doubtful debts
31887.7
2017
2017
a
accounts receivables
1590000
opening balance
658100
sales
1590000
accounts receivable
1590000
collection
-1224200
a
cost of goods sold
1256200
write off
-27900
inventory
1256200
ending receivables
996000
b
allowance for doubtful debts
27900
required ending balance in allowance for doubtful debts
999600*1.7%
16993
accounts receivables
27900
unadjusted balance
(beginning balance) cr
31887.7
c
cash
1224200
write off (dr)
-27900
3988
accounts receivables
1224200
adjustment to allowance for doubtful debts
13005.00
d
bad debt expense
13005
allowance for doubtful debts
13005
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