Manley Operates a Law Practice on the Accrual Method and Calendar

question 95

Multiple Choice

Manley operates a law practice on the accrual method and calendar year. At the beginning of the year, Manley's firm had an allowance for doubtful accounts with a balance of $15,000. At the end of the year, Manley recorded bad debt expense of $23,000 and the balance of doubtful accounts had increased to $18,000. What is Manley's deduction for bad debt expense this year?

• A)$23,000
• B)$3,000
• C)$26,000
• D)$5,000
• E)$20,000

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Definitions:

Profits

Earnings that exceed the costs and expenses incurred in operating a business.

Double Marginalization

A situation where both the manufacturer and retailer markup prices, leading to higher final prices for consumers.

Manufacturer

A business that uses raw materials, components, or parts to make a finished product that can be sold in the marketplace.

Retailer

A business or person that sells goods to consumers for personal or household use.