Uncollectible Accounts Town Company is involved in the manufacture and sale of toys. At the end of 2000, Town’s balance sheet reported total accounts receivable of $223,000 and an allowance for uncollectible accounts of $21,000. During 2001, the following events occurred:

1. Credit sales in the amount of $1,600,000 were made.

2. Collections of $1,550,000 were received.

3. Town recorded bad debt expense for 2001 as 2 percent of credit sales.

4. Customers with total payables of $19,000 to Town were declared bankrupt, and those accounts receivable were written off.

As director of finance of Town, you have been asked by a member of the executive committee to:

a. Analyze the above activities by giving the journal entries to be recorded by Town for each of the transactions.

b. Illustrate Town’s balance sheet disclosure of accounts receivable at December 31, 2001.

c. Evaluate the adequacy of Town’s allowance for uncollectible accounts at December 31, 2001.