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Question: The chief accountant for Dickinson Corporation provides you with the following list of accounts r...

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

Date		Customer		Amount
March 31		E. L. Masters Company		$7,800
June 30		Stephen Crane Associates		6,700
September 30		Amy Lowells Dress Shop		7,000
December 31		R. Frost, Inc.		9,830

Dickinson 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 Dickinsons sales are on a 30-day credit basis. Sales for the current year total $2,200,000. The balance in Accounts Receivable at year-end is $77,000 and an analysis of customer risk and charge-off experience indicates that 12% of receivables will be uncollectible (assume a zero balance in the allowance).

Instructions:

(a) Do you agree or disagree with Dickinson's policy concerning recognition of bad debt expense? Explain.

(b) B what amount would net income differ if bad debt expense was computed using the percentage-of-receivables approach?