The chief accountant for Dollywood Corporation provides you withthe following list of accounts receivable written off in thecurrent year:
Date Customer Amount
- March31 E.L. MastersCompany $7,800
- June30 HockingAssociates 9700
- September 30 Amy Lowell's DressShop 7000
- December 31 R. Bronson,Inc. 9830
Dollywood Corporation follows the policy ofdebiting Bad Debt Expense as accounts are written off. The chiefaccountant maintains that this procedure is appropriate forfinancial statement purposes because the Internal Revenue Servicewill not accept other methods for recognizing bad debts.
All of Dollywood Corp.'s sales are on a 30-daycredit basis. Sales for the current year total $2,400,000, andresearch has determined that bad debt losses approximate 2% ofsales.
Instructions: Do you agree or disagree with Dollywood's policy concerningrecognition of bad debt expense? Why or Why not?