During 2016, Becky loans her brother Ken $5,000, which he intends to use to establish a small business. Because Ken has no other assets and needs cash to establish the business, the agreement provides that Ken will repay the debt if (and when) sufficient funds are generated from the business. Becky and Ken do not establish an interest rate. The business is unsuccessful, and Ken is forced to file for bankruptcy in 2017. By the end of 2017, it is estimated that the creditors will receive only 20% of the amount owed. In 2018 the bankruptcy proceedings are closed, and the creditors receive 10% of the amount due on the debt. Requirement What is Becky's bad debt deduction for 2017? For 2018? (Enter a "0" if no bad debt deduction can be taken.) Becky's bad debt deduction will be for 2017 and $ for 2018.

During 2016, Becky loans her brother Ken $5,000, which he intends to use to establish a small business. Because Ken has no other assets and needs cash to establish the business, the agreement provides that Ken will repay the debt if (and when) sufficient funds are generated from the business. Becky and Ken do not establish an interest rate. The business is unsuccessful, and Ken is forced to file for bankruptcy in 2017. By the end of 2017, it is estimated that the creditors will receive only 20% of the amount owed. In 2018 the bankruptcy proceedings are closed, and the creditors receive 10% of the amount due on the debt. Requirement What is Becky's bad debt deduction for 2017? For 2018? (Enter a "0" if no bad debt deduction can be taken.) Becky's bad debt deduction will be for 2017 and $ for 2018.

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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