Petal, Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2017, the following occur associated with bad debts. $\begin{array}{lr}
\text { Credit sales } & \$ 400,000 \
\text { Collections on credit sales } & 250,000 \
\text { Amount added to the reserve } & 10,000 \
\text { Beginning balance in the reserve } & -0- \
\text { Identifiable bad debts during } 2017 & 12,000
\end{array}$ The amount of the deduction for bad debt expense for Petal for 2017 is:
A)$10,000.
B)$12,000.
C)$22,000.
D)$140,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Under the accrual method, Petal, Inc. can deduct the actual identifiable bad debts for the year, which is $12,000. The reserve method is not allowed for tax purposes.

Petal, Inc The Amount of the Deduction for Bad Debt Expense for to Calculate