Hayford & Woodward, Inc. began business in January 2020. During 2020, it had credit sales of $29,000,000. As of December 31, 2020, it had the following balances in accounts receivable:

	Current	1-30 Days	31-60 Days	61-90 Days	Over 90 Days
Littleton, Inc.	$ 400,000	$ 240,000	$ 120,000
Pigstey Industries	$ 100,000				$ 15,000
Snowfeld, Inc.	$ 350,000	$ 156,000
Huskers Company	$ 560,000		$ 200,000		$ 250,000
Star Family Enterprises	$ 790,000	$ 360,000
PRB, Inc.	$ 45,000
TK Company	$ 146,000	$ 120,000	$ 130,000	$ 150,000

Hayford & Woodward's auditors explained that the company will need to provide an estimate of its bad debts for the year. Hayford & Woodward is considering the following possibilities:

1. Calculating the allowance for uncollectible accounts as a percentage of ending accounts receivable using 6% in the computations.

2. Calculating bad debt expense as a percentage of credit sales using 0.5% in the computations.,

3. Calculating the allowance for uncollectible accounts with the aged accounts receivables method using the following percentages:

Age	Probability of Nonpayment
Current	1%
1-30 Days	2%
31-60 Days	6%
61-90 Days	20%
Over 90 Days	75%

During 2021, Hayford & Woodward's sales of $30,500,000 were all on credit. Assume the 2021 allowances were unused in 2021. As of December 31, 2021, it had the following balances in accounts receivable:

	Current	1-30 Days	31-60 Days	61-90 Days	Over 90 Days
Littleton, Inc.	$ 442,000
Pigstey Industries	$ 450,000		$ 320,000
Snowfeld, Inc.				$ 242,000	$ 340,000
Huskers Company	$ 375,000	$ 310,000	$ 250,000	$ 50,000	$ 42,000
Star Family Enterprises	$ 800,100	$ 402,000
PRB, Inc.	$ 34,000	$ 11,000
TK Company	$ 115,000	$ 100,000	$ 55,000	$ 55,000	$ 32,000

1. Which method do you think Hayford & Woodward should choose and what factors do you think they would consider in making the decision?

2. Do the various approaches provide significantly different effects on the income statement or balance sheet in 2020 or 2021?