On December 31, 2016 and 2017, Deutsche Telekom AG had net trade receivables in the amount of €9,179 million and €9,553 million, respectively. The following proportion of the receivables was past due on the reporting date:

The changes in Deutsche Telekom’s allowance for doubtful receivables were as follows:

Assume that Deutsche Telekom’s statutory tax rate was 31.4 percent in 2016 and 2017. Further assume that an analyst wishes to recognize an additional allowance for 20 percent of the receivables that are past due on the reporting date.

a What adjustments should the analyst make to Deutsche Telekom’s balance sheet at the end of 2016?

b What adjustments should the analyst make to Deutsche Telekom’s 2017 income statement?

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Not past due on the reporting date Past due on the reporting date Total 2016 2017 3,074 (33.5%) 4,107 (43.0%) 6,105 (66.5%) 5,446 (57.0%) 9,179 (100.0%) 9,553 (100.0%)