Petal, Inc. is an accrual basis taxpayer. Petal uses the aging approach to calculate the reserve for bad debts. During 2018, the following occur associated with bad debts.
The amount of the deduction for bad debt expense for Petal for 2018 is:

Question

Petal, Inc. is an accrual basis taxpayer. Petal uses the aging approach to calculate the reserve for bad debts. During 2018, the following occur associated with bad debts. 
The amount of the deduction for bad debt expense for Petal for 2018 is:

Quizplus · Accepted Answer

Petal uses the aging approach to calculate the reserve for bad debts. At the end of 2017, Petal had a balance of $80,000 in the reserve for bad debts. In 2018, Petal wrote off $30,000 of actual bad debts. Based on the aging analysis, Petal determined that it needed to increase its reserve for bad debts by $22,000. Therefore, the total amount of bad debt expense for 2018 is the sum of the write-offs ($30,000) and the increase in the reserve ($22,000), for a total of $52,000. However, Petal had a beginning balance in the reserve for bad debts of $80,000, so it can only deduct the net increase in the reserve, which is $12,000 ($80,000 beginning balance - $22,000 increase in reserve + $30,000 write-offs = $88,000 ending balance in the reserve for bad debts). Therefore, the amount of the deduction for bad debt expense for Petal for 2018 is $12,000.