On January 1, 2019, Big Red, Inc. had gross accounts receivable of $450,000 and a credit balance in the allowance for doubtful accounts of $52,500.

During 2019 the following activity occurred:

• Sales made on credit totaled $6,500,000
• Cash collections on credit sales totaled $6,618,000
• Account balances written off: $74,000.
• On December 28, 2019, $27,000 previously written off was collected.

Big Red, Inc. uses the Percentage of credit sales method to account for bad debt.

Required:

1. Prepare the journal entries to record the 2019 activity described by the four bulleted points (ignore the adjusting entryyou do that in part 3).

2. What are the balances in the accounts receivable and allowance for doubtful accounts prior to the adjusting entry(ies) at December 31, 2019?

3. On December 31, 2019, Big Red, Inc. evaluated the outstanding accounts receivables and determined that 12% of the gross receivables balance was uncollectible. Provide any necessary adjusting entry(ies) at the end of 2019.