WM Physicians & Associates, an investor-owned company, had the following account balances at the end of 2020:

Gross patient service revenue (total charges)	$ 1,000,000
Contractual discounts and allowances to third-party payers	$ 200,000
Charges for charity (indigent) care	$ 90,000
Estimated bad debts (implicit price concessions)	$ 60,000
Total expenses (excluding income tax expense)	$ 200,000

1. Calculate the net patient service revenue amount that would be shown on WM Physicians & Associates income statement for the year ended December 31, 2020 (2.5 points).
2. Suppose the 2020 contractual discounts and allowances balance reported above is understated by $70,000. In other words, the correct balance should be $270,000. Assuming a 35 percent income tax rate, what would be the effect of the misstatement on WM Physicians & Associates 2020 reported:
   1. Net patient service revenue (2.5 points)?
   2. Total expenses, including income tax expense (2.5 points)?
   3. Net income (2.5 points)?

For each item of B, indicate whether the balance is overstated, understated, or not affected by the misstatement. If overstated or understated, indicate by how much.

To answer question B, I suggest you use the following table:

	As stated	Corrected	Misstatement (How much the item was misstated (e.g., understated, overstated)
Net patient service revenue
Total expenses (income tax)
Net income

*Please note that you need to show how you worked out your answers to receive full credit (e.g., formulas used to work out answers, etc). If you simply provide only answers and even when all those answers are correct, only 20% of the full credit may be given.