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axpayer runs a greenhouse as a sole proprietorship using the accrual method. At the end of the taxable year, Taxpayer's accounts receivable totals $60,000, and he estimates that 3.5% of that amount is uncollectable. The current balance in his reserve for uncollectable accounts is $950. As of the end of the year, Taxpayer is aware of only one customer who will certainly not pay its account because it has gone out of business; that customer’s receivable balance is $4,725. Determine the amount of bad debt Taxpayer may deduct for the current taxable year.

axpayer runs a greenhouse as a sole proprietorship using the accrual method. At the end of the taxable year, Taxpayer's accounts receivable totals $60,000, and he estimates that 3.5% of that amount is uncollectable. The current balance in his reserve for uncollectable accounts is $950. As of the end of the year, Taxpayer is aware of only one customer who will certainly not pay its account because it has gone out of business; that customer’s receivable balance is $4,725. Determine the amount of bad debt Taxpayer may deduct for the current taxable year.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Taxpayer runs a greenhouse as a sole proprietorship using the accrual method. At the end of the taxable year, Taxpayer's accounts receivable totals $60,000, and he estimates that 3.5% of that amount is uncollectable. The current balance in his reserve for uncollectable accounts is $950. As of the end of the year, Taxpayer is aware of only one customer who will certainly not pay its account because it has gone out of business; that customer’s receivable balance is $4,725. Determine the amount of bad debt Taxpayer may deduct for the current taxable year.

 

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