Manley operates a law practice on the accrual method and calendar year. At the beginning of the year, Manley's firm had an allowance for doubtful accounts with a balance of $14,600. At the end of the year, Manley recorded bad debt expense of $21,900 and the balance of doubtful accounts had increased to $19,100. What is Manley's deduction for bad debt expense this year?

Question

Quizplus · Accepted Answer

Manley's deduction for bad debt expense is the amount by which the allowance for doubtful accounts increased during the year. The increase is $19,100 (end balance) - $14,600 (beginning balance) = $4,500. However, the bad debt expense recorded was $21,900, so the deduction is $21,900 - $4,500 = $17,400.

Manley Operates a Law Practice on the Accrual Method and Calendar