Shimmer Products is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 5.6% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 13.7% percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0–30 days past due at 5%, 31–90 days past due at 21%, and over 90 days past due at 30%. There is currently a zero balance, transferred from the prior year’s Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet.

There is also additional information regarding the distribution of accounts receivable by age.

Prepare the year-end adjusting entry for bad debt, using
A. Income statement method
B. Balance sheet method of receivables
C. Balance sheet aging of receivables method
D. Which method should the company choose, and why?

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2018 Year-End Totals for Shimmer Products Credit sales Accounts receivable $2,410,000 950,000