Practice problem 3 Recording and Reporting Allowance for Doubtful Accounts Using the Percentage of Credit Sales and Aging of Accounts Receivable Methods 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. At its December 31 year-end, total Accounts Receivable is $89,000, aged as follows: (1) 130 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 uncollectibility is (1) 10 percent, (2) 20 percent, and (3) 40 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,600 credit balance at December 31. Required: 1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 2. Prepare the December 31 adjusting entry. 3. Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet