The Tulip Company uses the percent of receivables method of accounting for uncollectible accounts receivable, and a perpetual inventory system. As of January 1, its net accounts receivable totaled $485,000 (Accounts Receivable $500,000 less a $15,000 Allowance for Doubtful Accounts). During the current year, the following transactions occurred. 1)Merchandise costing $2,400,000 was sold on account for $4,000,000. 2)The company collected $3,880,000 from customers on account.3)$20,000 of accounts receivable were deemed uncollectible and written off.4)$3,000 of accounts receivable previously written off as uncollectible were recovered.5)At year-end, Lily Company estimates that 3% of its accounts receivable are uncollectible.Prepare journal entries to record these transactions.
What will be an ideal response?
| 1) | Accounts Receivable | ? | 4,000,000 | ? | |
| ? | Sales | ? | ? | ? | 4,000,000 |
| ? | Cost of Goods Sold | ? | 2,400,000 | ? |
| ? | Merchandise Inventory | ? | ? | 2,400,000 |
| 2) | Cash | ? | ? | 3,880,000 | ? |
| ? | Accounts Receivable | ? | ? | 3,880,000 |
| 3) | Allowance for Doubtful Accounts | 20,000 | ? |
| ? | Accounts Receivable | ? | ? | 20,000 |
| 4) | Accounts Receivable | ? | 3,000 | ? |
| ? | Allowance for Doubtful Accounts | ? | 3,000 |
| ? | Cash | ? | ? | 3,000 | ? |
| ? | Accounts Receivable | ? | ? | 3,000 |
| 5) | Bad Debts Expense | ? | 20,000 | ? |
| ? | Allowance for Doubtful Accounts | ? | 20,000 |
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