ACTIVITY 59 EVALUATING ACCOUNTS RECEIVABLE Purpose: - Analyze trends in Accounts Recewable and the Allowance for Bad Debtaccounts. Assume you work in the corporate loan affice of Lanford Bank. Chris Ives, owner of Cl Manufacturing, Inc. has come to you seeking a loan of $350,000 for new manufacturing equipment to expand his operations with the He proposes to use his accounts receivable as collateral for the loan and has provided you Q1 Examine the trend in each of the following accounts. 3. Soles revenue: In Year 6 it (increased / decreased), and then in Year 7 it (increased / decreased). b. Cost of goods sold: In Year 6 it (increased / decreased), and then in Year 7 it (increased / decreased). c. Operoting income: in Year 6 it (increased/decreased), and then in Year 7 it (increased / decreased). d. Accounts receivoble: In Year 6 it (increased / decreased), and then in Year 7 it (increased / decreased). e. Allowance for bad debts: In Year 6 it (increased/decreased), and then in Year 7 it (increased / decreased). f. Comment on any unexpected or suspicious observations: Q2 Compute the Accounts Receivable Turnover ratio and the Allowance as a Percentage of Sales ratio for each of the three years. Record in the chart above. What information do these ratios reveal? Q3 The amount reported for the ollowance for bod debts is a(n) (known / estimated) amount so this amount (can / cannot) be manipulated