Problem:
Vandross Company has recorded bad debt expense in the past at a rate of 1.5% of net sales. In 2014, Vandross decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt expense would have been $382,680 instead of $298,650. In 2014, bad debt expense will be $126,990 instead of $91,500.
Required:
Question: If Vandross's tax rate is 28%, what amount should it report as the cumulative effect of changing the estimated bad debt rate?
Note: Be sure to show how you arrived at your answer.