Allowance for Uncollectible Accounts'Ethics vs. Conservatism To aid in determining the balance for the allowance for uncollectible accounts, an aging schedule is often prepared. The Arrow Company prepared the following aging schedule for December 31, 2009:

The current balance in allowance for uncollectible accounts is $2,000. The president of Arrow Company directs that the allowance be adjusted to $12,000. His reasoning is that 2009 has been a bad year for profits. Additional expenses this year will hardly be noticed, and this will help profits in future years.

Required
a. 1. If the allowance for uncollectible accounts is adjusted to $6,050, how much will this add to expense for 2009?
2. If the allowance for uncollectible accounts is adjusted to $12,000, how much will this add to expense for 2009?
b. Is the president's direction an example of conservatism or unethical?Comment.

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ARROW COMPANY Aging Schedule of Accounts Receivable Age of Accounts Receivable Balance Estimate Percent Uncollectible Estimated Uncollectible Accounts Current 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due Total S120,000 40,000 30,000 20,000 25,000 $235,000 1.5% 2.0 3.0 4.0 7.0 $1,800 800 900 800 1,750 $6,050