Question 1 (10 marks)The following account balances were found for Celtics Ltd. at the beginning of its fiscal year, January 1, 2020:Accounts Receivable........................................................................ $1,240,250Allowance for Doubtful Accounts................................................... (19,220)Sales for the year were $8,100,000, of which 60% was on credit, and credit sales returns were $146,000. Cashcollections were $5,416,000. In 2020, Celtics had also written off $62,500 of its accounts receivable due toprobable delinquency. The companys credit and collection manager has estimated that 6% of outstandingaccounts receivable are uncollectible.InstructionsShow all calculations and round all figures to the whole dollars:a) Calculate the amount of the net credit sales. (2 marks)b) Using the allowance method, prepare the entry recording of the accounts receivable written off in 2020.(2 marks)c) Calculate the bad debt expense for the year and record the appropriate journal entry. (4 marks)d) Present the accounts receivable section on Celtics statement of financial position. Show both the grossand net amounts. (2 marks)Question 2 (8 marks)Cavaliers Ltd. prepares monthly financial statements. Inventory is counted only at year-end; thus, month-endinventories must be estimated. All sales are made on credit. The rate of markup on cost is 25%. The followinginformation relates to May:Accounts receivable, May 1................................................. $31,000Accounts receivable, May 31............................................... 37,000Collections of accounts during May .................................... 94,000Inventory, May 1.................................................................. 47,000Net purchases during May ................................................... 75,000InstructionsShow all calculations and round all figures to the whole dollars:a) Calculate Cavaliers credit sales for the year. (2 marks)b) Given the rate of markup on cost is 25%, calculate the rate of gross margin on sales. (2 marks)c) Estimated the closing inventory on May 31. (4 marks)Question 3 (8 marks)On December 31, 2017, Hornets Company finished consultation services and accepted in exchange apromissory note with a face value of $600,000, a due date of December 31, 2020, and a stated rate of 5%, withinterest receivable at the end of each year. The fair value of the services is not readily determinable, and thenote is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputedrate of interest of 10%.InstructionsShow all calculations and round all figures to the whole dollars:a) Determine the present value of the note. (2 marks)b) Prepare a Schedule of Note Discount Amortization for Hornets Company under the effective interestmethod. (6 marks