1)On December 31, 2015, a company reported the following values for its allowances for doubtful accounts:

Allowance for doubtful accounts	31/12/2015
Balance at the beginning of the year	30,000
Provision for bad debts (=bad debt expense)	2,000
Write-offs	5,000
Balance at the end of the year	27,000

Gross trade receivables on December 31, 2015 and January 1, 2015 were 80,000 and 100,000, respectively. The companys tax rate equals 30 percent.

If an analyst decides that the companys allowance for doubtful accounts should have been 25 percent of gross trade receivables on 31 December 2015 and 1 January 2015, the adjustments to the income statement would be to

A)Zero

B)Decrease the bad debt expense by 2,000, increase the tax expense by 600, and increase profit or loss by 1,400.

C)Increase the bad debt expense by 5,000, decrease the tax expense by 1,500, and decrease profit or loss by 3,500.

D)Increase the bad debt expense by 3,000, decrease the tax expense by 900, and decrease profit or loss by 2,100.

2)Company As non-current assets have a residual value of zero, a beginning book value of 5,000, and an initial cost of 10,000. Company A uses an annual depreciation percentage of 10%. Its effective tax rate is 30 percent. What adjustments would an analyst make to company As current years tax expense if assuming that company As depreciation percentage should be 12%?

a.Decrease tax expense by 60

b.Increase tax expense by 60

c.Decrease tax expense by 30

d.Increase tax expense by 30

e.No adjustment