Gross patient service revenue (total charges) $975,000
Estimated provision for bad debts 50,000
Contractual discounts and allowances to third-party payers 250,000
Charges for charity (indigent) care 100,000
A. Construct the revenue section for this facility's income statement for the year ended December 31, 2015
B. Suppose the 2015 contractual discounts and allowances balance reported above is understated by $50,000. In other words, the correct balance should be $300,000. Assuming a 40 percent income tax rate, what would be the effect of the misstatement on the facility reported:
1. Net patient service revenue?
2. Total expenses, including income tax expense?
3. Net income?
For each item (1-3) indicate whether the balance is overstated, understated, or not affected by the misstatement. If overstated or understated, indicate by how much.