On June 2,2014,Fred's TV Sales sold Mark a large HD TV,on account,for $12,000.Fred's TV Sales uses the accrual method.In 2015,when the balance on the account was $8,000,Mark filed for bankruptcy.Fred was notified that he could not expect to receive any of the amount owed to him.In 2016,final settlement was made and Fred received $1,000.How much bad debt loss can Fred deduct in 2016?

Question

Quizplus · Accepted Answer

Fred can only deduct the bad debt loss that was not recovered. In 2016, he received $1,000 from the $8,000 owed, so he cannot deduct any bad debt loss for that year since the loss was already accounted for in 2015.

On June 2,2014,Fred's TV Sales Sold Mark a Large HD