Q1) Piece Corporation operates in industry which has high rate of bad debts. Before any year-end adjustments, balance in Piece's Accounts Receivable account was $555,000 and Allowance for Doubtful Accounts had credit balance of$35,000. Year-end balance reported in balance sheet for Allowance for Doubtful Accounts will be based on aging schedule given below.
|Days Account Outstanding
||Probability of Collection
|Less than 16 days
|Between 16 and 30 days
|Between 31 and 45 days
|Between 46 and 60 days
|Between 61 and 75 days
|Over 75 days
a) What is the suitable balance for Allowance for Doubtful Accounts at year-end?
b) Illustrate how accounts receivable would be presented on balance sheet.
c) Determine the dollar effect of the year-end bad debt adjustment on before-tax income?