Carla Company has recorded bad debt expense in the past at a rate of 1.5% of accounts receivable,...

Question

Carla Company has recorded bad debt expense in the past at a rate of 1.5% of accounts receivable, based on an

aging analysis. In 2017, Carla decides to increase its estimate to 2%. If the new rate had been used in prior

years, cumulative bad debt expense would have been $384,500 instead of $304,200. In 2017, bad debt

expense will be $129,500 instead of $92,180. If Carla’s tax rate is 28%, what amount should it report as the

cumulative effect of changing the estimated bad debt rate?

Robert · Accepted Answer

Carla Company would report  the amount  due to cumulative effect of changing the estimated 
bad debt rate is $0, but the company could use current year newly estimated bad expense is 
$129,500. 
Explanation: 
This Company has tried to change the accounting principles.

Carla Company has recorded bad debt expense in the past at a rate of 1.5% of accounts receivable, based on an aging analysis. In 2017, Carla decides to increase its estimate to 2%. If the new rate had...

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