Chatter Corporation operates in an industry that has a high rate of bad debts. Before any year-end

Chatter Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Chatter’s Accounts Receivable account was $389,000 and the Allowance for Doubtful Accounts had a debit balance of $5,000. The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below:

Days Account Outstanding     Amount         Probability of Collection

Less than 16 days                 $293,000        .97

Between 16 and 30 days        $102,000        .89

Between 31 and 45 days        $ 70,000         .83

Between 46 and 60 days         $ 55,000        .76

Between 61 and 75 days         $ 28,000        .60

Over 75 days                         $ 8,000           .30

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

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

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