Question
During its 2021 fiscal period, Leslie's Boutique, a sole proprietorship, wrote off $13,000 in bad debts. At the end of its 2021 fiscal period the
During its 2021 fiscal period, Leslie's Boutique, a sole proprietorship, wrote off $13,000 in bad debts. At the end of its 2021 fiscal period the accounts receivable balance was $256,400. Based on past experience, it is expected that 4% of these accounts will prove uncollectible. A detailed analysis of 2021 receivables applying the approach acceptable to the CRA results in a doubtful debt reserve of $8,780. In its 2020 fiscal period, Leslie's Boutique had claimed a reserve for doubtful debts of $12,300. By what amount will the business income of Leslie's Boutique for the 2021 fiscal period be increased or decreased as a result of these accounts receivables transactions?
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