In 2010, Tru Corporation Deducted $5,000 of Bad Debts

question 91

Essay

In 2010, Tru Corporation deducted $5,000 of bad debts. It received no tax benefit from the deduction because it h NOL in 2010 that it was unable to carry back or forward. In 2011, Tru recovered $4,000 of the amount due.
a) What amount must Tru include in income in 2011?
b) What effect does the $4,000 have on E&P in 2011, if any?

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Definitions:

Breakdown

A detailed analysis or classification of something into its constituent parts.

Long-Lived Assets

Assets with a useful life longer than one year, such as buildings, machinery, and equipment, used in the operation of a business.

Held for Sale

Assets or business segments classified as being available for immediate sale and expected to be sold within one year.

Normal Balance

The typical or expected balance of an account in double-entry bookkeeping, which is either debit for assets and expenses or credit for liabilities, equity, and revenue.