Petal, Inc The Amount of the Deduction for Bad Debt Expense for to Calculate

question 149

Multiple Choice

Petal, Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2017, the following occur associated with bad debts. $\begin{array}{lr}\text { Credit sales } & \$ 400,000 \\\text { Collections on credit sales } & 250,000 \\\text { Amount added to the reserve } & 10,000 \\\text { Beginning balance in the reserve } & -0- \\\text { Identifiable bad debts during } 2017 & 12,000\end{array}$ The amount of the deduction for bad debt expense for Petal for 2017 is:

• A)$10,000.
• B)$12,000.
• C)$22,000.
• D)$140,000.
• E)None of the above.

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Definitions:

Used Car Dealers

Businesses specialized in selling pre-owned vehicles to consumers.

Strict Liability

The doctrine under which people may be liable for injuries to others whether or not they have been negligent or committed an international tort. Also called absolute liability.

Unavoidably Dangerous

Products or activities that cannot be made completely safe, no matter the amount of caution used in their design or execution.

Punitive Damages

Damages in excess of actual losses suffered by the plaintiff awarded as a measure of punishment for the defendant’s wrongful acts. Also called exemplary damages.