The chief accountant for Emily Dickinson Corporation provides you with the following list of accounts receivable written

Question:

The chief accountant for Emily Dickinson Corporation provides you with the following list of accounts receivable written off in the current year.

Emily Dickinson Corporation follows the policy of debiting Bad Debt Expense as accounts are written off.
The chief accountant maintains that this procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for recognizing bad debts.
All of Emily Dickinson Corporation's sales are on a 30-day credit basis. Sales for the current year total $2,200,000, and research has determined that bad debt losses approximate 2% of sales.

Instructions
(a) Do you agree or disagree with Dickinson's policy concerning recognition of bad debt expense? Why or why not?
(b) By what amount would net income differ if bad debt expense was computed using the percentage-of-salesapproach?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Corporation
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