Part II (16 marks) The information below was extracted from the unadjusted trial balance as at 31 December 2020 of Happy Ltd. No adjusting entry has been made for the Allowance for Impairment account in 2020.

Accounts receivable $600,000 Net sales (70% on credit) $900,000 Allowance for impairment (Credit balance) $18,000

(a) Considering the following two independent situations:

1. (i) An aging analysis indicated that $40,000 of the accounts receivable at year end will be uncollectible. Assume Happy Ltd uses statement of financial position

   approach. (6 marks)

2. (ii) It is estimated that 2% of net credit sales for the year will become uncollectible.

   Assume Happy Ltd uses income statement approach. (6 marks)

For each of the above independent situation, (1) prepare the adjusting entries to record the estimated uncollectible accounts for the year 2020 and (2) present the Account Receivable with the estimated collectible amount in the Statement of Financial Position vertically at 31 December 2020 of Happy Ltd.

(b) If Happy Ltds Allowance for Impairment account has a debit balance of $16,000 prior to making any adjustment to record impairment loss of receivable, using the same information as (a)(i) above, prepare the adjusting entries to record the estimated uncollectible accounts for the year.