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Sally White and John Smith launched ABC company, (ABC) three years ago and the company enjoyed a great deal of success. ABC grew, both in terms of the number of employees as well as products offered to customers. Despite the growth, Sally and John were convinced that the company could expand further if they could show investors how well they had been performing. It is now the end of 2019, and Sally and John are considering options for their annual financial reports. They know their accounting choices could affect the numbers that the company reported, even if the underlying economics were unchanged. While they did not want to be misleading or aggressive in their accounting choices, they did want to make sure that they were reporting in a way that was comparable to their competitors, and not putting them at a disadvantage when it came to attracting investors. To begin, Sally and John reviewed their approach to Accounts Receivable. In previous years, they assumed that 4% of their sales on account (i.e., on credit) would turn out to be uncollectible. However, as time passed, they got better at identifying which customers were likely to be creditworthy. They also noted that one of their primary competitors appeared to assume that only 2.25% of sales on account would be uncollectible. In 2019, ABC made $1,500,000 in sales on account, had a beginning opening) credit balance in the Allowance for Doubtful Accounts of $62.600, and had written off $36.000 in uncollectible accounts for the year. Questions: 1) Assuming they continue to use the percentage of sales method and maintain the assumption that 4% of sales on account will be uncollectible, determine (a) the ending (closing) balance in the Allowance for Doubtful Accounts for 2019, as well as (b) how much bad debt expense would be recorded for 2019. 2) Compare the amounts in (1) to what would be recorded if, instead, they switch in 2019 to an assumption closer to that of their competitor that only 2.25% of sales on account are likely to be uncollectible. 3) Another thing that Sally and John considered was a switch to the Aging of Receivables method for dealing with uncollectible accounts. As they gained more experience with their customers, they also had a better sense of how the collectability of accounts was likely to change as time passed. At the end of 2019, they had the following outstanding accounts receivable: Balance $ 253,000 114.000 93,000 61,000 35,000 19.000 Age of Receivable Under 30 days 30-60 days 61-120 days 121-240 days 241-360 days Over 360 days Estimated % Uncollectible 0.80% 2.00% 5.00% 20.00% 35.00% 60.00% Determine the (a) the ending (closing) balance in the Allowance for Doubtful Accounts for 2019, as well as (6) how much bad debt expense would be recorded for 2019, but now if they use the Aging of Receivables Method. 4) Based on the above analyses, how would you recommend that Sally and John deal with uncollectible accounts in their financial reporting? What are some of the pros and cons of each option