Innovative Tech Inc (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year end. During November 2013, ITC sold services on account for $100,000 and estimated that ½ of one percent of those sales would be uncollectible. At its December 31 year end, total accounts receivable is $89,000, aged as follows: (1) 1-30 days old, $75,000, (2) 31-90 days old, $10,000; and (3) more than 90 days old, $4,000. Experience has shown that for each age group, the average rate of uncollectable is (1) 10 percent, (2) 20 percent and (3) 40 percent, respectively. Before the end of the year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,600 credit balance at December 31, 2013.

Required:

1. Prepare the November 2013 adjusting entry for bad debts.

2. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.

3. Prepare the December 31, 2013.

4. Show the various accounts related to accounts receivable should be shown on the December 31, 2013, balance sheet.

On january 2, 2016, twilight hospital purchased a $94,800 special radiology scanner from bella inc. the scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. the straight-line method of depreciation is used on this scanner. annual operating costs with this scanner are $106,000. approximately one year later, the hospital is approached by dyno technology salesperson, jacob cullen, who indicated that purchasing the scanner in 2016 from bella inc. was a mistake. he points out that dyno has a scanner that will save twilight hospital $26,000 a year in operating expenses over its 3-year useful life. jacob notes that the new scanner will cost $111,000 and has the same capabilities as the scanner purchased last year. the hospital agrees that both scanners are of equal quality. the new scanner will have no disposal value. jacob agrees to buy the old scanner from twilight hospital for $40,500. if twilight hospital sells its old scanner on january 2, 2017, compute the gain or loss on the sale. prepare an incremental analysis of twilight hospital.