Jim may claim a bad-debt expense deduction on his 2022 taxes for the $2,500 of uncollectible receivable.
Jim may claim a bad-debt expense deduction on his 2022 taxes for the $2,500 of uncollectible receivable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
1. Jim owns & operates a pencil manufacturing business that extends lines of credit to its customers, subject to a 30-day payment period. Office Emporium ordered $5,000 of pencils for its store on account in August of 2022 from Jim in anticipation of the back-to-school season. In December of 2022, Jim still has not received $2,500 in payment from Office Emporium, and Jim determines this amount to be uncollectible. Jim uses the cash method of accounting. Which of the following options is correct?
Jim may claim a bad-debt expense deduction on his 2022 taxes for the $2,500 of uncollectible receivable.
Since Jim cannot claim a bad-debt expense deduction in 2022, he can carry the $2,500 loss forward into 2023
Jim cannot claim any bad-debt expense this year.
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