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
A. Sold $1,353,000 of merchandise (that had cost $979,100) on credit, terms n/30.
B. Wrote off $20,900 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 1.90% of accounts receivable would be uncollectible.
Year 2
E. Sold $1,544,700 of merchandise (that had cost $1,318,300) on credit, terms n/30.
F. Wrote off $27,000 of uncollectible accounts receivable.
G. Received $1,194,200 cash in payment of accounts receivable.
H. In adjusting the accounts on December 31, the company estimated that 1.90% of accounts receivable would be uncollectible.
Required:
Prepare journal entries to record Liang's 2016 and 2017 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).

2016

a.Dr Account receivable$1,353,000

Cr Sales revenue $1,353,000

Dr Cost of goods sold$979,100

Cr Inventory $979,100

bDr Allowance for doubtful accounts$20,900

Cr Account receivable $20,900

cDr Cash$669,200

Cr Account receivable $669,200

d Dr Bad debt expense $33,495

Cr Allowance for doubtful accounts $33,495

2017

eDr Account receivable$1,544,700

Cr Sales revenue $1,544,700

Dr Cost of goods sold$1,318,300

Cr Inventory $1,318,300

fDr Allowance for doubtful accounts$27,000

Cr Account receivable $27,000

Dr Cash$1,194,200

Cr Account receivable $1,194,200

h Dr Bad debt expense$33,147

Cr Allowance for doubtful accounts $33,147

Explanation:

Preparation of the journal entries to record Liang's 2016 and 2017 summarized transactions and its year-end adjustments to record bad debts expense

2016

a.Dr Account receivable$1,353,000

Cr Sales revenue $1,353,000

Dr Cost of goods sold$979,100

Cr Inventory $979,100

bDr Allowance for doubtful accounts$20,900

Cr Account receivable $20,900

cDr Cash$669,200

Cr Account receivable $669,200

d Dr Bad debt expense $33,495

Cr Allowance for doubtful accounts $33,495

($1,353,000-$669,200-$20,900=$662,900)

($662,900*1.90%+$20,900)

($12,595+$20,900=$33,495)

2017

eDr Account receivable$1,544,700

Cr Sales revenue $1,544,700

Dr Cost of goods sold$1,318,300

Cr Inventory $1,318,300

fDr Allowance for doubtful accounts$27,000

Cr Account receivable $27,000

Dr Cash$1,194,200

Cr Account receivable $1,194,200

h Dr Bad debt expense$33,147

Cr Allowance for doubtful accounts $33,147

($1,544,700+$662,900-$1,194,200-$27,000=$986,400)

($986,400*1.90%=$18,742)

($18,742+$27,000-$12,595=$33,147)

answer; ///i believe the correct answer is (c) laissez-faire;