Question
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
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 $7,350
June 30 Stephen Crane Associates 8,310
September 30 Amy Lowell's Dress Shop 6,280
December 31 R. Frost, Inc. 9,710
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 Dickinson Corporation's sales are on a 30-day credit basis. Sales for the current year total $2,242,400, and research has determined that bad debt losses approximate 4% of sales.
By what amount would net income differ if bad debt expense was computed using the percentage-of-sales approach?
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