QUESTION 3 (25 MARKS) At January 1, 20X7, the accounts of Baxter Company include the following: Accounts Receivable. Allowance for Bad Debts. $158,000 $4,000 Cr During the year, Baxter Company completed the following selected transactions 20X7 January 17 June 29 August 6 December 28 December 31 Sold inventory to P. Richards on account for $600. Ignore the cost of the goods sold. Wrote off the P. Richards account as uncollectible after repeated efforts to collect from him Received $600 from P. Richards, along with a letter stating his apology for paying late. Reinstated Richards's account in full and recorded the cash collection. Made a compound entry to write off the following accounts as uncollectible: B. Scott, $1,700; M. Roper, $1,300. Recorded bad debt expense based on the aging of accounts receivable which follows: Age Interval 1-30 days past due Estimated % Balance Uncollectible $80,000 0.1% 31-60 days past due 35,000 1% 61-90 days past due. 14,000 10% Over 90 days past due 10.000 30% Total $139.000 Required: i) Record the transactions in the general journal, clearly showing all workings, including the aging schedule used to estimate the amount of Bad-Debt Expense at December 31. ii) (12 marks) Open the Allowance for Bad-Debts Account, and post the entries affecting the account. Keep a running balance. (4 marks) iii) Show how Baxter Company should report accounts receivable on its Balance Sheet at December 31, 20X7 iv) v) (2 marks) What effect does the write-off of accounts have on the net realizable value of accounts receivable? (2 mark) In making the annual adjusting entry for uncollectible accounts, a company may utilize either a balance sheet approach or an income statement approach to determine the uncollectible expense for the period. Briefly explain these two alternative approaches. (5 Marks) MOETERM ess 200 2 0.4