An entity began operations on January 1, 2013. From 2013 to 2015, the entity provided for doubtful accounts based on 5% of annual credit sales. On January 1, 2016, the entity changed the method of determining the allowance for doubtful accounts using an aging schedule.

In addition, the entity writes off all accounts receivable that are over 1 year old. The following information relates to the years ended December 31, 2013, 2014, 2015 and 2016:

	2016	2015	2014	2013
Credit sales	15,000,000	9,500,000	8,000,000	6,000,000
Collections excluding recovery	11,700,000	8,200,000	6,700,000	4,500,000
Accounts written off during year	200,000	120,000	80,000	None
Recovery of accounts written off	90,000	40,000	25,000	None

Days Account Outstanding	Amount	Probability of Collection
Less than 16 days	3,000,000	98%
Between 16 and 50 days	1,500,000	80%
Between 51 and 100 days	1,200,000	75%
Between 101 and 200 days	800,000	50%
Between 201 and 365 days	400,000	20%
Over 365 days to be written off	100,000	0%

1. What was the allowance for doubtful accounts on January 1, 2016?

1. 1,175,000
2. 1,040,000
3. 1,240,000
4. 975,000

2. What amount should be reported as allowance for doubtful accounts on December 31, 2016?

1. 1,380,000
2. 1,480,000
3. 2,420,000
4. 1,060,000

3. What amount should be reported as doubtful accounts expense for 2016?

1. 550,000
2. 750,000
3. 450,000
4. 200,000

4. What is the net realizable value of accounts receivable on December 31, 2016?

1. 6,900,000
2. 7,000,000
3. 5,520,000
4. 5,620,000