Problem 72A Accounts receivable transactions and bad debts a

Problem 7-2A Accounts receivable transactions and bad debts adjustments LO C1, P2 Liang Company began operations on January 1, 2012. During its frst two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These ransactions are summarized as follows 2012 a. Sold $1,345,434 of merchandise (that had cost $975.000) on aredit, serms n/30 b. Whote off $18,300 of uncollectible accounts receivable. c. Received $569,200 cash in payment of accounts recelvable d. i, adisting the accounts on December 31, te oompany estimated that 1 5% of accounts receivable wil 2013 Sold $1,525 634 of mrhandise (that had cost $1,250,000) on credit, terms n/3 Wirobe of $27,800 of uncolectible accounts receivable Received $1,204,600 cash in payment of accounts receivable h. In adjusting the accounts on December 31,the company estimated that 1.5% of accounts receivable be uncolectble Prepare journal entries to record Liang\'s 2012 summarized transactions and ts yeanend adjustments to econd bad deis expense. (The company uses the perpetual inventory system and it applies the allowance method for its accounts receivable.)(Round your Intermediate caloulations amount) to the nearest dollar 1.345434 1346434 Cost of good sol 975,000 Merchandise inventory 975,000 O Bad debls expense 18,300 18,300 669,200 or doubetul accounts 9,869 ,869 O Prepare joumal entries to recond Lng\'s 2013 summarined transactions and ts 3 4 5 6 8 aps lock

Solution

No Transaction General Journal Debit Credit 1 a(1) Accounts receivable $ 1,345,434 Sales $   1,345,434 2 a(2) Cost of good sold $     975,000 Merchandise inventory $       975,000 3 b Allowance for doubtful account $        18,300 Accounts receivable $         18,300 4 c Cash $     669,200 Accounts receivable $       669,200 5 d Bad debts expense $        28,169 Allowance for doubtful accounts $         28,169 Explanation **rounded to nearest dollar 2012 Beginning receivables $                   -   Credit sales $   1,345,434 Collections - $     (669,200) Write-offs - $       (18,300) Ending receivables = $       657,934 Percent uncollectible x 1.5% Required ending allowance = $            9,869 **Cr. Unadjusted balance + $         18,300 Dr. Adjustment to the allowance = $         28,169 Cr. No Transaction General Journal Debit Credit 6 e(1) Accounts receivable $ 1,525,634 Sales $   1,525,634 7 e(2) Cost of good sold $ 1,250,000 Merchandise inventory $   1,250,000 8 f Allowance for doubtful account $        27,800 Accounts receivable $         27,800 9 g Cash $ 1,204,600 Accounts receivable $   1,204,600 10 h Bad debts expense $        32,199 Allowance for doubtful accounts $         32,199 Explanation **rounded to nearest dollar 2013 Beginning receivables $       657,934 Credit sales $   1,525,634 Collections - $ (1,204,600) Write-offs - $       (27,800) Ending receivables = $       951,168 Percent uncollectible x 1.5% Required ending allowance = $         14,268 **Cr. Unadjusted balance Beginning (Cr.)           9,869 Write-offs (Dr.)        27,800 + $         17,931 Dr. Adjustment to the allowance = $         32,199 Cr. Prob 7-3A No Date General Journal Debit Credit 1 Dec 31 Bad Debt Expense $        85,230 (5682000 x 1.5%) Allowance for doubtful accounts $         85,230 NO adjustment to allowance account when bad debt recognized as % of sales 2 Dec 31 Bad Debt Expense $        75,870 (1905000+5682000) x 1% Allowance for doubtful accounts $         75,870 3 Dec 31 Bad Debt Expense $        80,085 Allowance for doubtful accounts $         80,085 Ending receivables = $   1,270,100 Percent uncollectible x 5.0% Required ending allowance = $         63,505 **Cr. Unadjusted balance + $         16,580 Dr. Adjustment to the allowance = $         80,085 Cr.