Which of the Following Taxpayers Can Claim a Business Bad

question 103

Multiple Choice

Which of the following taxpayers can claim a business bad debt deduction for the current year?
I.Johnson is a dentist using the cash basis of accounting. He has accounts receivable from patients totaling $7,800 that are more than 90 days past due.
II.George owns and operates a sporting goods store and uses the accrual method of accounting. He has several customers who have owed him money for more than 10 months.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

T-Accounts

A graphic representation of a general ledger account that outlines the debit and credit sides to visualize the effect of transactions on the account.

Reversing Entries

Entries executed at the onset of an accounting cycle to annul or reverse the adjusting records that were established at the end of the last period.

Journal Entries

Recordings in accounting journals of the financial transactions made by a business, showing debits and credits for each transaction.

Salary Payroll

The total amount paid by an employer to its employees as salaries over a specified period.