Question

Problem 9.4A Accounts receivable transactions and bad debts adjustments C1 P2 P3 Liang Company began operations in Year I. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transac- tions are summarized as follows. Year 1 a. Sold S1,345,434 of merchandise (that had cost $975.000) on credit, terms n/30. b. Wrote off $18,300 of uncollectible accounts receivable. c. Received $669,200 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable would be uncollectible. Check Bed Debts Expense. 528.100 Year 2 e. Sold $1.525,634 of merchandise on credit (that had cost $1.250,000), terms n/30. t. Wrote off $27.800 of uncollectible accounts receivable. 9. Received S1,204,600 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable would be uncollectible. Dy Bad Dots Expenso, $32,199 Required Prepare journal entries to record Liang's 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 to the nearest dollar.)

Answer 1

Journal Entries
Date	Particulars					Debit	Credit
Year 1
a)	Accounts Receivable					$       13,45,434
	To Sales						$       13,45,434
	Cost of Goods sold					$         9,75,000
	To Finished Goods						$         9,75,000
b)	Allowance for uncollectible accounts					$            18,300
	To Accounts Receivable						$            18,300
c)	Cash					$         6,69,200
	To Accounts Receivable						$         6,69,200
d)	Bad Debt Expense					$            28,169
	To Allowance for uncollectible accounts						$            28,169
	(W.N.1)
Year 2
e)	Accounts Receivable					$       15,25,634
	To Sales						$       15,25,634
	Cost of Goods sold					$       12,50,000
	To Finished Goods						$       12,50,000
f)	Allowance for uncollectible accounts					$            27,800
	To Accounts Receivable						$            27,800
g)	Cash					$       12,04,600
	To Accounts Receivable						$       12,04,600
h)	Bad Debt Expense					$            32,199
	To Allowance for uncollectible accounts						$            32,199
	(W.N.2)

	W.N.1
	Computation of bad debt expense for Year 1
	Ending balance of accounts receivable:
	Sales				$       13,45,434
Less:	Write off				$            18,300
Less:	Cash collection				$         6,69,200
					$         6,57,934
	Estimated % of uncollectible amount				1.50%
	Estimated amount of uncollectible				$              9,869
Add:	Debit balance in allowance account				$            18,300
	Bad debt expense to be recorded				$            28,169
	W.N.2
	Computation of bad debt expense for Year 2
	Ending balance of accounts receivable:
	Beginning balance				$         6,57,934
Add:	Sales				$       15,25,634
Less:	Write off				$            27,800
Less:	Cash collection				$       12,04,600
					$         9,51,168
	Estimated % of uncollectible amount				1.50%
	Estimated amount of uncollectible				$            14,268
Add:	Debit balance in allowance account				$            17,931
	($ 27800 - $ 9869)
	Bad debt expense to be recorded				$            32,199