Question:
E-Z Loan Company makes loans to high-riskborrowers. E-Z borrows from its banks and then lends money to people with bad credit. The bank requires E-Z Loan to submit quarterly financial statements in order to keep its line of credit. E-Z's main asset is Notes Receivable. Therefore, Uncollectible Note Expense and Allowance for Uncollectible Notes are important accounts.
Slade McQueen, the owner of E-Z Loan Company, wantsnet income to increase in a smooth pattern, rather than increase in some periods and decrease in others. To report smoothly increasing netincome. McQueen overestimates the expense. He reasons that over time the income overstatements roughly offset the income understatements.
Is McQueen's practice of smoothing income ethical? Why or Why not?
Answer between 300-400 words