# Clovis Enterprises reports $845,500 in credit sales for 2018 and$933,000 in 2019. It has a $758,000 accounts receivable balance at the end of 2018 and$841,000 at the end of 2019. Clovis uses the income statement method to record bad debt estimation at 4% during 2018. To manage earnings more favorably, Clovis changes bad debt estimation to the balance sheet method at 5% during 2019. A. Determine the bad debt estimation for 2018. B. Determine the bad debt estimation for 2019. C. Describe a benefit to Clovis Enterprises in 2019 as a result of its earnings management.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

Chapter
Section
FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 12EB
Textbook Problem
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## Clovis Enterprises reports $845,500 in credit sales for 2018 and$933,000 in 2019. It has a $758,000 accounts receivable balance at the end of 2018 and$841,000 at the end of 2019. Clovis uses the income statement method to record bad debt estimation at 4% during 2018. To manage earnings more favorably, Clovis changes bad debt estimation to the balance sheet method at 5% during 2019.A. Determine the bad debt estimation for 2018.B. Determine the bad debt estimation for 2019.C. Describe a benefit to Clovis Enterprises in 2019 as a result of its earnings management.

To determine

(a)

Introduction:

Bad debts is referred as the sum total which cannot be collected from clients accounts. Bad debts adversely impact the accounts receivables.

To calculate:

The bad debt estimation for 2018.

### Explanation of Solution

Calculation bad debt expense using income statement method in 2018:

To determine

(b)

To calculate:

The bad debt estimation for 2019.

To determine

(c)

To explain:

The benefit to the enterprise in 2019 as a result of its earnings management.

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