Reference no: EM133551006

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

1. Sold $1,353,900 of merchandise on credit (that had cost $977,800), terms n/30.
2. Wrote off $18,700 of uncollectible accounts receivable.
3. Received $669,800 cash in payment of accounts receivable.
4. In adjusting the accounts on December 31, the company estimated that 1.80% of accounts receivable would be uncollectible.

Year 2

1. Sold $1,518,000 of merchandise (that had cost $1,346,800) on credit, terms n/30.
2. Wrote off $30,400 of uncollectible accounts receivable.
3. Received $1,188,600 cash in payment of accounts receivable.
4. 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.)