On December 31, 2019, Mills Manufacturing Ltd. had a $197,000 balance in its Accounts Receivable and a $10,400 balance in its Allowance for Doubtful Accounts. During 2020, the company made total sales of $858,000, of which $225,000 were cash sales. By the end of the year, Mills had received payments of $552,000 from its customers on account. The company also wrote off as uncollectible $13,300 of its receivables when it learned that these customers had declared bankruptcy. The company was subsequently able to recover $5,700 from one of these customers. (Note that this amount is not included in the cash collections noted above.) Management estimates that bad debts expense will be 3% of its credit sales.

1. Prepare the journal entries to record all the 2020 transactions, including the adjustment for bad debts expense at year end.

2. Show how the accounts receivable section of the statement of financial position at December 31, 2020, would be presented.

3. What amount of bad debts expense would appear in the statement of income for the year ended December 31, 2020?