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 $1,345,434 of merchandise (that had cost $975,000) on credit, terms n/30.

Wrote off $18,300 of uncollectible accounts receivable.

Received $669,200 cash in payment of accounts receivable.

In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable would be ______.

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ladeitan ladeitan · Answer 1 · 2020-05-10T03:59:00+02:00

Answer:

In adjusting the accounts on December 31, the company estimated that 1.5% of accounts receivable would be $9,869.01.

Explanation:

Let's journalize the transactions as follows:

Debit Accounts receivable $1,345,434

Credit Sales revenue $1,345,434

(To record credit sales)

Debit Allowance for doubtful accounts $18,300

Credit Accounts receivable $18,300

(Being write-off of accounts receivable)

Debit Cash $669,200

Credit Accounts receivable $669,200

(Collection on account)

With the entries above, the balance in accounts receivable will be $1,345,434 - $18,300 - $669,200 = $657,934

1.5% thereof = $9,869.01