Liang Company began operations on January 1, 2016. During its first two a number

Question

Liang Company began operations on January 1, 2016. During its first two a number of transactions involving sales on credit, accounts receivable collections, an transactions are summarized as follows: years, the company completed d bad debts. These 2016 a. Sold $1.345,434 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 will be uncollectible.

Explanation / Answer

Solution:

In the books of Liang Company

Journal

Working notes:

(1) Calculation of adjustable uncollectible Accounts receivable:

For 2016: (1345434 - 18300 - 669200)×1.5% = $9,869

For 2017: (1525634 - 27800 - 1204600)×1.5%= $4,399

Date Particulars Amount($) Debit Amount($) Credit 2016 (a) Accounts receivable A/C 1345434 Sales A/C 1345434 (Being merchandise sold on credit) (b) Allowance for Doubtful Debts A/C 18300 Accounts receivable A/C 18300 (Being uncollectible Accounts receivable written off) (c) Cash A/C 669200 Accounts receivable A/C 669200 (Being cash received of Accounts receivable) (d) 12/31/2016 Bad debts expense A/C 9869 Allowance for Doubtful Debts A/C 9869 (Being uncollectible Accounts receivable adjusted) 2017 (e) Accounts receivable A/C 1525634 Sales A/C 1525634 (Being merchandise sold on credit) (f) Allowance for Doubtful Debts A/C 27800 Accounts receivable A/C 27800 (Being uncollectible Accounts receivable written off) (g) Cash A/C 1204600 Accounts receivable A/C 1204600 (Being cash received of Accounts receivable) (h) 12/31/2017 Bad Debts expense A/C 4399 Allowance for Doubtful Debts A/C 4399 (Being uncollectible Accounts receivable adjusted)

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