894 The Accounts Receivable balance for Lake Company at December 31, 2019, was $20,000. During 2020, Lake earned revenue of $454,000 on account and collected $325,000 on account. Lake wrote off $5,600 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 5 percent of accounts receivable. 1. Assume Lake had an unadjusted $2,700 credit balance in Allowance for Bad Debts at December 31, 2020. Journalize Lake's December 31, 2020, adjustment to record bad debts expense using the percent-of-receivables method. 2. Assume Lake had an unadjusted $2,400 debit balance in Allowance for Bad Debts at December 31, 2020. Journalize Lake's December 31, 2020, adjustment to record bad debts expense using the percent-of-receivables method. E9-15 Franklin Ltd., a gift store, reported the following amounts in its 2020 financial state- ments. The 2019 figures are given for comparison Evaluating ratio data 1.2020, 0.72 2020 2019 $ 26,000 22,000 $148,000 18,000 Current assets Cash Short-term investments Accounts receivable Less: Allow. for doubtful accts Inventory Prepaid insurance Total current assets Total current liabilities Net sales $ 12,000 46,000 $120,000 20,000 100,000 384,000 4,000 $ 546,000 $ 218,000 $1,460,000 130,000 378,000 4,000 $ 560,000 $ 224,000 $1,464,000 Chanter Receivables 529 Required 1. Determine whether Franklin Ltd.'s acid-test ratio improved or deteriorated from 2019 to 2020. How does Franklin Ltd.'s acid-test ratio compare with the industry average of 0.90? 2. Compare the days' sales in receivables measure for 2020 with the company's credit terms of net 30. What action, if any, should Franklin Ltd. take? 3. Indicate the most likely effect of the following changes in credit policy on the days' sales in receivables (+ for increase, - for decrease, and NE for no effect): a. Granted credit to people with poor credit history. b. Increased collection techniques or methods. c. Granted credit with discounts for early payment