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)

answerblank(1) negatively.blank(2); rises; blank(3) falls;

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.