Distrust but Hopeful Ltd is getting ready to publish their annual financial statements. In estimating bad debt expense, Mr Scan da Lous, the newly appointed controller, is deciding between the income statement method and the balance sheet method. As Mr da Lous's bonus is tied to the net income, his decision lies upon which method produces a higher net income. The following information is provided by the company's accountant Ms Truthful: Beginning Gross Accounts Receivables Beginning Allowance for Doubtful Accounts Sales (all sales are made on credit) Write-offs for the year Recoveries of accounts previously written-off Cash Collection from customers (exclude recoveries) Required: 3.1 3 points 3.2 5 points 3.3 2 points 3.4 5 points $12,000 $1,440 $24,800 $1,300 $320 $19,402 Assume that 8% of credit sales are typically not collectible. If the income statement method is used, what is the reported Bad Debt Expense? Instead of the income statement apporach, assume that 12% of ending AR (gross) is uncollectible. Under the balance sheet approach, what is the reported Bad Debt Expense? Which method will give Mr Flexible a higher bonus? The auditor uncovers that the actual write off should have been $2,000 (not $1,300). What is the reported Bad Debt Expense under the two different approaches?