Exercise 3-2 Prepare journal entries for the Russell Company’s 2011 and 2012 tra
ID: 2585104 • Letter: E
Question
Exercise 3-2
Prepare journal entries for the Russell Company’s 2011 and 2012 transactions summarized below and the company’s year-end adjustments to Bad Debts Expense. Round off all amounts to the nearest dollar.
Note: The company uses a perpetual inventory system.
Summarized Transactions
The Russell Company began operations on January 1, 2011, and completed several transactions that involved credit sales, accounts receivable collections, and bad debts.
2011
Sold merchandize that cost $1,350,000, on credit, for $1,575,000. Terms n/30.
Wrote off $18,100 of accounts receivable that were uncollectible.
Received cash in the amount of $822,500 as accounts receivables payments.
In performing year-end account adjustments, the company estimated that 2 percent of accounts receivables will not be collectible.
[Create the 2011 journal entries here.]
2012
Sold merchandize that cost $1,325,000, on credit, for $1,592,000. Terms n/30.
Wrote off $24,500 of accounts receivable that were uncollectible.
Received cash in the amount of $1,428,300 as accounts receivables payments.
In performing year-end account adjustments, the company estimated that 2 percent of accounts receivables will not be collectible.
[Create the 2012 journal entries here.]
Explanation / Answer
2011:
Journal entries of Russell company for the year 2011
Particulars
Debit
Credit
Account receivable
$1,575,000
sales
$1,575,000
Cost of goods sold
$1,350,000
merchandise inventory
$1,350,000
Allowances for uncollectible accounts
$18,100
Accounts receivable
$18,100
Cash
$822,500
Accounts receivable
$822,500
Bad debt expenses
$32,788
allowances for uncollectible accounts
$32,788
(1,575,000-18,100-822,500)*2%+18,100
2012:
Journal entries of Russell company for the year 2012
Particulars
Debit
Credit
Account receivable
$1,592,000
sales
$1,592,000
Cost of goods sold
$1,325,000
merchandise inventory
$1,325,000
Allowances for uncollectible accounts
$24,500
Accounts receivable
$24,500
Cash
$1,428,300
Accounts receivable
$1,428,300
Bad debt expenses
$27,284
allowances for uncollectible accounts
$27,284
(1,592,000-24,500-1,428,300)*2%+24,500
Particulars
Debit
Credit
Account receivable
$1,575,000
sales
$1,575,000
Cost of goods sold
$1,350,000
merchandise inventory
$1,350,000
Allowances for uncollectible accounts
$18,100
Accounts receivable
$18,100
Cash
$822,500
Accounts receivable
$822,500
Bad debt expenses
$32,788
allowances for uncollectible accounts
$32,788
(1,575,000-18,100-822,500)*2%+18,100
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