Sawyer, inc. consistently estimated its bad debt expense at 1 percent of credit sales. in 2017, however, sawyer determines that it must revise upward the estimate of bad debts for the current year’s credit sales to 2%, or double the prior years’ percentage. sawyer uses the revised estimate of 2% and calculates bad debt expense of $500,000. how is the change in the estimated bad debt expense reported in sawyer’s 2017 financial statements?
a) $500,000 of expense reported as a change in accounting principle and accounted for under the retrospective approach.
b) $500,000 of expense in the income statement and $500,000 as a contra asset in the balance sheet.
c) $500,000 of expense in the income statement as an ordinary item, $500,000 of expense reported as an adjustment to the beginning balance of retained earnings (net of tax).
d) $500,000 of expense and $500,000 as an unusual loss in the income statement.