The Lily 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 $192,000 (Accounts Receivable $200,000 less an $8,000 Allowance for Doubtful Accounts). During the current year, the following transactions occurred. 1)Merchandise costing $1,050,000 was sold on account for $1,400,000. 2)The company collected $1,294,000 from customers on account.3)$6,000 of accounts receivable were deemed uncollectible and written off.4)$1,000 of accounts receivable previously written off as uncollectible were recovered.5)At year-end, Lily Company estimates that 4% of its accounts receivable are uncollectible.Prepare journal entries to record these transactions.
What will be an ideal response?
| 1) | Accounts Receivable | ? | 1,400,000 | ? | |
| ? | Sales | ? | ? | ? | 1,400,000 |
| ? | Cost of Goods Sold | ? | 1,050,000 | ? |
| ? | Merchandise Inventory | ? | ? | 1,050,000 |
| 2) | Cash | ? | ? | 1,294,000 | ? |
| ? | Accounts Receivable | ? | ? | 1,294,000 |
| 3) | Allowance for Doubtful Accounts | 6,000 | ? |
| ? | Accounts Receivable | ? | ? | 6,000 |
| 4) | Accounts Receivable | ? | 1,000 | ? |
| ? | Allowance for Doubtful Accounts | ? | 1,000 |
| ? | Cash | ? | ? | 1,000 | ? |
| ? | Accounts Receivable | ? | ? | 1,000 |
| 5) | Bad Debts Expense | ? | 9,000 | ? |
| ? | Allowance for Doubtful Accounts | ? | 9,000 |
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