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P7.3 (LO 3) (Bad-Debt Reporting-Aging) Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the

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P7.3 (LO 3) (Bad-Debt Reporting-Aging) Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow's Accounts Receivable was $555,000 and Allowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance reported in the statement of financial position for Allowance for Doubtful Accounts will be based on the following aging schedule. Days Account Outstanding Amount Probability of Collection Less than 16 days 16-30 days 31-45 days 46-60 days 61-75 days Over 75 days $300,000 .98 100,000 .90 80,000 .85 40,000 .80 20,000 .55 15,000 .00 Instructions a. What is the appropriate balance for Allowance for Doubtful Accounts at year- end? b. Show how accounts receivable would be presented on the statement of financial position. c. What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

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