Potter Ltd. began operations in January 2019. On December 31, 2019, the end of its first year of operations, the balance in the company’s Accounts Receivable account was $136,000. All of the company’s sales are made on account, and during 2019, 80% of the total credit sales were collected and no accounts were written off as uncollectible. Management estimated that 2% of the credit sales would be uncollectible. During the following year, 2020, Potter had sales totalling $952,000. It collected 75% of these sales, together with 95% of the outstanding receivables from 2019. During 2020, the company wrote off $19,800 of receivables from customers whose accounts were determined to be uncollectible. During the year, the company also recovered $3,200 from customers whose accounts had previously been written off. (Note that this amount was not included in the collection figures given above.) The company estimated its bad debts expense to be 2.5% of its credit sales.

Required

a. Prepare the necessary journal entries for recording all the preceding transactions in the accounting system of Potter Ltd. for 2019 and 2020.

b. Show the accounts receivable section of the statement of financial position at December 31, 2020.