Jana Kingston Company has recorded bad debt expense in the past at a rate of 11/2% of net sales. In...

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Jana Kingston Company has recorded bad debt expense in the past at a rate of 11/2% of net sales. In 2008, Kingston decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt expense would have been $380,000 instead of $285,000. In 2008, bad debt expense will be $120,000 instead of $90,000. If Kingston’s tax rate is 30%, what amount should it report as the cumulative effect of changing the estimated bad debt rate?

David · Accepted Answer

Jana Kingston Company has recorded bad debt expense in the past at a rate of 
11/2% of net sales. In 2008, Kingston decides to increase its estimate to 2%. If 
the new rate had been used in prior years, cumulative bad debt expense would 
have been $380,000 instead of $285,000. In 2008,

Jana Kingston Company has recorded bad debt expense in the past at a rate of 11/2% of net sales. In 2008, Kingston decides to increase its estimate to 2%. If the new rate had been used in prior years,...

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