Petal,Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2012,the following occur associated with bad debts. The amount of the deduction for bad debt expense for Petal for 2012 is:

Question

Petal,Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2012,the following occur associated with bad debts.  The amount of the deduction for bad debt expense for Petal for 2012 is:

Quizplus · Accepted Answer

To calculate the deduction for bad debt expense, we need to use the aging approach, which uses percentages based on the age of the accounts receivable to estimate the amount of bad debt. 
For Petal, the calculation for 2012 is as follows: 
- Accounts receivable at year end (12/31/12): $280,000 
- Estimated percentage of bad debts: 
1-30 days: 2% 
31-60 days: 5% 
61-90 days: 20% 
Over 90 days: 50% 
- Calculation: 
(2% x $40,000) + (5% x $50,000) + (20% x $60,000) + (50% x $130,000) = $14,000 
Therefore, the amount of the deduction for bad debt expense for Petal for 2012 is $14,000.

Petal,IncIs an Accrual Basis Taxpayer