Prepare journal entries to record liang year 1 and year 2
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Last Updated:
20-Oct-23
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Case Study: Liang Company began operations in Year 1. 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.
Year 1
- Sold $1,353,900 of merchandise on credit (that had cost $977,800), terms n/30.
- Wrote off $18,700 of uncollectible accounts receivable.
- Received $669,800 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 1.80% of accounts receivable would be uncollectible.
Year 2
- Sold $1,518,000 of merchandise (that had cost $1,346,800) on credit, terms n/30.
- Wrote off $30,400 of uncollectible accounts receivable.
- Received $1,188,600 cash in payment of accounts receivable.
- In adjusting the accounts on December 31, the company estimated that 1.80% of accounts receivable would be uncollectible.
Required:
Prepare journal entries to record Liang`s Year 1 and Year 2 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.)