On December 31, 2010, before the yearly financial statements were prepared, the controller of the Stern Corporation reviewed certain transactions that affected accounts receivable and the allowance for doubtful accounts. The controller first examined the December 31, 2009, balance sheet. A subsequent review of the year's transactions applicable to accounts receivable revealed the items listed below:
1. Sales on account during 2010 amounted to $9,965,575.
2. Payment received on accounts receivable during 2010 totaled $9,685,420.
3. During the year, accounts receivable totaling $26,854 were deemed uncollectible and were written off.
4. Two accounts that had been written off as uncollectible in 2009 were collected in 2010. One account for $2,108 was paid in full. A partial payment of $1,566 was made by the Hollowell Company on another account that originally had amounted to $2,486. The controller was reasonably sure this account would be paid in full because reliable reports were circulating that the trustee in bankruptcy for the Hollowell Company would pay all obligations 100 cents on the dollar.
5. The Allowance for Bad Debts was adjusted to equal 3 percent of the balance in Accounts Receivable at the end of the year.
Questions
1. Analyze the effect of each of these transactions in terms of its effect on Accounts Receivable, Allowance for Doubtful Accounts, and any other account that may be involved, and prepare necessary journal entries.
2. Give the correct totals for Accounts Receivable and the Allowance for Doubtful Accounts as of December 31, 2010, after the transactions affecting them had been recorded.
3. Calculate the current ratio, acid-test ratio, and days' receivables figures as of December 31, 2010. Assume that amounts for items other than those described in the case are the same as on December 31, 2009.
Exhibit 1

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STERN CORPORATION Balance Sheet As of December 31, 2009 Assets Current assets Cash Accounts receivable 5 671,344 s 988,257 29,648 Less: Allowance for doubtful accounts U.S. Treasury securities at cost Inventories 958,609 274,060 1,734,405 3,638,418 Total current assets Other assets Investments Land Building 412,294 186,563 2,405,259 663.379 3,425,585 1,642.358 56,484 40,400 58,298 37.156 42,534 28,005 1,741,880 1,783,227 16,084 21,142 Less: Accumulated depreciation Factory machinery Less: Accumulated depreciation Furniture and fixtures Less: Accumulated depreciation Automotive equipment Less: Accumulated depreciation Office machines Tools Patent Prepaid expenses 14,529 61,294 56,250 100,190 8,031,871 Total assets Liabilities and Shareholders Equity Current iabilities Accounts payable Taxes payable Accrued salaries, wages, and interest Long-term debt, due within one yeatr 5 510,000 709,354 141,478 69.300 1.430,132 Total current liabilities Noncurrent liabilitiess Long-term debt Shareholders equity Common stock Retained earnings 1.247.368 2,503,275 2,851,096 5354,371 $8,031,871 Total shareholders' equity Total liabilities and shareholders' equity