Johnson Co. began operations on January 1, 2021. During the next 2 years, they completed a number of transactions involving credit sales, accounts receivable collections and bad debts. The transactions are summarized as follows (assume a perpetual inventory system): 2021 January 26 Merchandise that cost $608,000 was sold for $776,000 under credit terms of n/30. June 13 Wrote off uncollectible accounts receivable in the amount of $16,000. December 19 Received cash of $520,000 in payment of outstanding accounts receivable. December 31 In adjusting the accounts on December 31, concluded that 2.0% of the outstanding accounts receivable would become uncollectible. 2022 March 26 Johnson Co. sold merchandise for $1,144,000 under credit terms of n/60. The merchandise had cost $896,000. August 15 Wrote off uncollectible accounts receivable in the amount of $24,000. November 22 Payments of outstanding accounts received totaled $560,000. December 31 While accounts were being adjusted on December 31, it was concluded that 2.0% of the outstanding accounts receivable would become uncollectible. Required: Prepare journal entries to record Johnson’s 2021 and 2022 summarized transactions, and the adjusting entries to record bad debt expense at the end of each year (December 31).
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.
Johnson Co. began operations on January 1, 2021. During the next 2 years, they completed a number of transactions involving credit sales, accounts receivable collections and
2021
January 26 Merchandise that cost $608,000 was sold for $776,000 under credit terms of n/30.
June 13 Wrote off uncollectible accounts receivable in the amount of $16,000.
December 19 Received cash of $520,000 in payment of outstanding accounts receivable.
December 31 In adjusting the accounts on December 31, concluded that 2.0% of the outstanding accounts receivable would become uncollectible.
2022
March 26 Johnson Co. sold merchandise for $1,144,000 under credit terms of n/60. The merchandise had cost $896,000.
August 15 Wrote off uncollectible accounts receivable in the amount of $24,000.
November 22 Payments of outstanding accounts received totaled $560,000.
December 31 While accounts were being adjusted on December 31, it was concluded that 2.0% of the outstanding accounts receivable would become uncollectible.
Required:
Prepare
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