Question $1$

Orange Company has an operating cycle of less than one year and provides credit terms for all of its customers. On May $20,2022,$ the company factored, without recourse, some of its accounts receivable. On October $1,2022,$ Orange Company sold special order merchandise and received an interest$-$bearing note due June $30,2023.$ Orange Company uses the allowance method to account for uncollectible accounts. During $2022,$ some accounts were written off as uncollectible, and other accounts previously written off as uncollectible were collected.

a$)$ Discuss how Orange Company should report the effects of the interest$-$bearing note on its income statement for the year ended December $31,2022$ and its December $31,2022$ Statement of Financial Position.

b$)$ Discuss how Orange Company should account for the collection of the accounts previously written off as uncollectible.

c$)$ What are the two basic approaches to estimating uncollectible accounts under the allowance method and discuss? What is the rationale for each approach?