Question
Bonita Company has recorded bad debt expense in the past at a rate of1.5% of accounts receivable, based on an aging analysis. In 2017, Bonita
Bonita Company has recorded bad debt expense in the past at a rate of1.5% of accounts receivable, based on an aging analysis. In 2017, Bonita decides to increase its estimate to2%. If the new rate had been used in prior years, cumulative bad debt expense would have been $387,800instead of $299,000. In 2017, bad debt expense will be $122,400instead of $91,130. If Bonita's tax rate is27%, what amount should it report as the cumulative effect of changing the estimated bad debt rate?
How does one solve this problem and whats the formula? and could you show me what the formula is like where to plug in the numbers and how you got the answer?
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