Question

X has recorded bad debt expense in the past at a rate of 1.5% of accounts receivable, based on an aging analysis. In 2017, X decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt expense would have been $387,800 instead of $289,900. In 2017, bad debt expense will be $131,800 instead of $98,130. If X’s tax rate is 26%, what amount should it report as the cumulative effect of changing the estimated bad debt rate?

Answer 1

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