Peru Industries began operations on January 1, 2023. 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: 2023 Sold merchandise on credit for $2,320,000, terms n/30 (COGS = $1,282,000). Wrote off uncollectible accounts receivable in the amount of $35,400. Received cash of $1,386,000 in payment of outstanding accounts receivable. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible. 2024 Sold merchandise on credit for $3,038,000, terms n/30 (COGS = $1,655,000). Wrote off uncollectible accounts receivable in the amount of $55,100. Received cash of $2,294,000 in payment of outstanding accounts receivable. In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible. Company uses the allowance method to account for uncollectible. Required: Prepare journal entries to record Peru’s 2023 and 2024 summarized transactions and the adjusting entries to record bad debt expense at the end of each year. (Round your intermediate calculations and final answers to nearest whole dollar.)
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Peru Industries began operations on January 1, 2023. During the next two years, the company completed a number of transactions involving credit sales,
2023
Sold merchandise on credit for $2,320,000, terms n/30 (COGS = $1,282,000).
Wrote off uncollectible accounts receivable in the amount of $35,400.
Received cash of $1,386,000 in payment of outstanding accounts receivable.
In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.
2024
Sold merchandise on credit for $3,038,000, terms n/30 (COGS = $1,655,000).
Wrote off uncollectible accounts receivable in the amount of $55,100.
Received cash of $2,294,000 in payment of outstanding accounts receivable.
In adjusting the accounts on December 31, concluded that 1.5% of the outstanding accounts receivable would become uncollectible.
Company uses the allowance method to account for uncollectible.
Required:
Prepare
2023
2024
Please dont provide answer in an image format thank you
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
