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3 October, 17:26

At December 31, 2017, Sorrento Inc. estimated bad debts as 3% of the outstanding balance of Accounts Receivable. At December 31, 2018, Sorrento determined that it should increase its estimate to 6.5%. This change is handled on a:

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  1. 3 October, 17:41
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    Prospective basis.

    Explanation:

    It has been given that the estimated bed debts are 3% in the year 2017 while in the year 2018, this bed debt will increase to 6.5%.

    Changes in regular estimates are part of a continuous improvement process. In many processes retrospective adjustment is interdicted.

    Companies can record potential changes in estimates every year.
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Home » Business » At December 31, 2017, Sorrento Inc. estimated bad debts as 3% of the outstanding balance of Accounts Receivable. At December 31, 2018, Sorrento determined that it should increase its estimate to 6.5%. This change is handled on a:
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