a memo to Paul Smith outlining the potential cost of accepting charge customers. D Discuss e between the allowance method for uncollectible accounts and the direct writ method. Also discuss the cost of accepting credit cards. ATC 5-5 Ethical Dilemma How bad can it be? Alonzo Saunders owns a small training services company that is experiencing growing pains. Th company has grown rapidly by offering liberal credit terms to its customers. Although his competit require payment for services within 30 days, Saunders permits his customers to delay payment for up to 90 days. Saunders's customers thereby have time to fully evaluate the training that employee receive before they must pay for that training. Saunders guarantees satisfaction. If a customeris unhappy, the customer does not have to pay. Saunders works with reputable companies, provides top- quality training, and rarely encounters dissatisfied customers. The long collection period, however, has created a cash flow problem. Saunders has a $100,000 accounts receivable balance, but needs cash to pay current bills. He has recently negotiated a loan agreement with National Bank of Brighton County 1hnt hould solve his cash flow problems. The reivable as collateral for the loan. The balance, thereby giving him access to use he estimates he needs approxi- loan agreement requires that Saunders pledge bank agreed to loan Saunders 70 percent of the $70,000 cash. Saunders is satisfied with this aa mately $60,000 On the day Saunders was to execute the loan agreement, he heard a rumor that his biggest customer was experiencing financial problems and might declare bankruptey. The customer owed Saunders $45,000. Saunders promptly called the customer's chief accountant and learned "off the record" that the rumor was true. The accountant told Saunders that the company's net worth was negative and most