Dortmund Stockyard reports $896,000 in credit sales for 2018 and $802,670 in 2019. It has a $675,000 accounts receivable balance at the end of 2018, and $682,000 at the end of 2019. Dortmund uses the balance sheet method to record bad debt estimation at 8% during 2018. To manage earnings more favorably, Dortmund changes bad debt estimation to the income statement method at 6% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Dortmund Stockyard in 2019 as a result of its earnings management.
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Principles of Management