The Patchwork Corporation manufactures sweaters for sale to athletic-wear retailers. the following information was available on Patch work for the years ended December 31, 2016 and 2017:

12/31/16 12/31/17

Cash $20,000 $15,000

Account receivable 90,000 ?

Allowance for doubtful accounts 8,500 ?

Inventory 85,000 80,000

Current liabilities 80,000 86,000

Total credit sales 600,000 550,000

Collection on account receivable 440,000 500,000

During 2017, Patchwork had the following transaction:

1. On June, 2017, sales of 80,000 to a major customer were settled, with Patchwork accepting an $80,000, one year note bearing 7% interest that is payable at maturity. The $80,000 is not included in the total credit sales amount above.

2. Patchwork factors sme accounts receivable at the end of the year. Accounts totalling $60,000 bare transferred to Primary Factors Inc., with recourse. Primary Factors retain 5% of the balances, and will receive the collections directly from Patchwork's customers. Patchwork is assessed a finance charge of 6% on this transfer. The fair value of the recourse obligation is $7,000.

3. Patchwork wrote off $3,200 of accounts receivable during 2017.

4. Based on the latest available information, the 2017 allowance for doubtful accounts should have a balance of $12,000 at December 31, 2017.

Included in the Cash balance at December 31, 2017, are the following: a chequing account with a balance of $9,600, postage stamps of 100$, petty cash of $300, coins and currency on hand of $3,000, and postdated cheques from customers of $2,000. Patchwork is a private company that follows ASPE

Required:

(a) Prepare the journal entry for the sale to the customer from June 1

(b) Prepare the journal entry for the factoring the accounts receivable to Primary Factors Inc

(c) Based on the above transaction, the additional information, determine the balance of Accounts Receivable and bad Debt Expense at December 31, 2017

(d) Prepare the current assets sections of Patchwork's statement of financial position at December 31, 2017

(e) Calculate the current ratios for Patchwork for 2016 and 2017.

(f) Calculate the receivables turnover ratio for Patchwork for 2017. Patchwork's receivables turnover ratio for 2016 was 3.8 times.

(g) Discuss the effect on the current and accounts receivable turnover ratio if Patchwork had decided to assign $40,000 of accounts receivable instead of factoring them to primary factors Inc. Recalculate the ratios to support your conclusion