Aerospace Electronics reports $567,000 in credit sales for 2018 and $632,500 in 2019. They have a $499,000 accounts receivable balance at the end of 2018, and $600,000 at the end of 2019. Aerospace uses the income statement method to record bad debt estimation at 5% during 2018. To manage earnings more favorably, Aerospace changes bad debt estimation to the balance sheet method at 7% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Aerospace Electronics in 2019 as a result of its earnings management.