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| Since incorporating three years ago, Lawrence Inc. has estimated bad debts at a rate of 3% using the income statement approach. During its fourth year in business, after recording the uncollectible accounts expense based on its previous estimate, Lawrence determined that its estimate of bad debts should be increased to 4.5%. During this fourth year, Lawrence recorded sales of $25,000,000 and had an ending accounts receivable balance of $2,000,000. This change would decrease A. the current year's income by $1,125,000 and decrease the firm's degree of operating leverage. B. both degree of operating leverage and times interest earned. C. the current year's income by $30,000 and decrease the firm's financial leverage. D. the current year's income by $375,000 and increase the firm's degree of operating leverage. |