Pronghorn Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Pronghorn's Accounts Receivable account was $ 592,700 and Allowance for Doubtful Accounts had a credit balance of $ 40,680. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below.

Days Account Outstanding		Amount			Probability of Collection
Less than 16 days		$ 314,400			0.96
Between 16 and 30 days		116,600			0.90
Between 31 and 45 days		85,600			0.86
Between 46 and 60 days		41,900			0.79
Between 61 and 75 days		18,600			0.53
Over 75 days (to be written off )		15,600			0.00

(a)

What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

Balance for Allowance for Doubtful Accounts

$

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(b)

Show how accounts receivable would be presented on the balance sheet.

PRONGHORN CORPORATION Balance Sheet (Partial)
Accounts ReceivableInterest RevenueAccounts PayableNet Accounts ReceivableNotes PayableAllowance for Doubtful AccountsNotes Receivable			$
AddLess: Notes PayableAccounts ReceivableInterest RevenueAccounts PayableNotes ReceivableAllowance for Doubtful AccountsNet Accounts Receivable
Accounts PayableInterest RevenueNotes PayableAccounts ReceivableNotes ReceivableAllowance for Doubtful AccountsNet Accounts Receivable			$

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(c)

What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

Dollar effect of the year-end bad debt adjustment

$ decreaseincrease

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