Reference no: EM132672441

Peru Industries began operations on January 1, 2020. During the next two years, the company completed a number of transactions involving credit sales, accounts receivable collections, and bad debts (assume a perpetual inventory system). These transactions are summarized as follows:

2020

1. Sold merchandise on credit for $2,280,000, terms n/30 (COGS = $1,258,000).
2. Wrote off uncollectible accounts receivable in the amount of $34,600.
3. Received cash of $1,354,000 in payment of outstanding accounts receivable.
4. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.

2021

1. Sold merchandise on credit for $2,982,000, terms n/30 (COGS = $1,619,000).
2. Wrote off uncollectible accounts receivable in the amount of $53,900.
3. Received cash of $2,246,000 in payment of outstanding accounts receivable.
4. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.
5. Company uses the allowance method to account for uncollectible.

Required:

Problem 1: Prepare journal entries to record Peru's 2020 and 2021 summarized transactions and the adjusting entries to record bad debt expense at the end of each year.