Pratsky, Inc., had the following account balances:

December 31, 1999 Assets Liabilities Cash $12,500 Accounts payable $10,000 Accounts Receivable 22,400 Allowance for Stockholders’ Equity:

uncollectible accounts (3,400) Invested capital 20,000 Inventory 17,500 Retained earnings 19,000 Total stockholders’ equity 39,000

$49,000 $49,000 During 2000, the corporation had the following transactions: 1. Issued common stock for $40,000 cash. 2. Purchased inventory on account; 200 units @ $38, then 150 units @ $39.

Note: Beginning inventory was comprised of 500 units @ $35. 3. Purchased 200 shares of IBM for $45/share and purchased 100 shares of Microsoft for $90/share. 4. Sales at retail during 2000 were $75,000 (half received in cash, and the balance on account). 5. Write-offs of uncollectible accounts totaled $2,600. 6. Received $38,000 from receivable customers. 7. Paid creditors on account,$18,000.Paid operating expenses for the current period of $51,000.

Required

a. Set up the beginning balances in the balance sheet equation. Leave enough room to add new columns as necessary.

b. Record transactions 1 through 10 using the balance sheet equation.

c. Calculate the following ratios for 1999 and 2000 and evaluate the company’s management of its accounts receivable:
• Accounts receivable/sales (assume that sales in 1999 were $125,786)
• Sales/day • Collection period • Allowance as a percentage of accounts receivable