Crimson Ltd (Company) sells high-quality racing and mountain bicycles. At the end of 2019, the Companys statement of financial position reported total accounts receivable of $250,000 and an allowance for doubtful accounts of $18,000.

During 2020, the following events occurred:

• Credit sales in the amount of $2,300,000 were made.
• Collections of $2,250,000 were received on account (i.e. collected account receivables)
• Customers with total debts to the Company of $38,000 were declared bankrupt, and those accounts receivable were written off.
• Bad debts expense for 2020 was recorded as 2% of credit sales.

The Company offers customers 30-day credit terms.

Required

As the chief financial officer for the Company, you have been asked by a member of the executive committee to do the following:

1. Describe the effects of each of the above transactions on the Company's Statement of Profit or Loss and the Statement of Financial Position. Be specific. (4.5 marks)
2. Show, in good format, how the accounts receivable will be reported on Companys statement of financial position as at December 31, 2020. Quantify. (2 marks)
3. Evaluate the adequacy of the amount in the Company's allowance for doubtful accounts account as at December 31, 2020. If more information is required, explain what specific information you would need. (1.5 marks)
4. Briefly describe the connection, if any, between bad debt expense and statement of cash flows and comment whether bad debt expense could be used to manipulate cash flows from operating activities. (1 mark)
5. You have been informed that the Companys accounts receivable turnover ratio is 7. Briefly comment on this result. (1 mark)