Question

On June 2, 2018, Fred’s TV Sales sold Mark a large HD TV on account for $12,000. Fred’s TV Sales uses the accrual method. In 2019, when the balance on the account was $8,000, Mark filed for bankruptcy. Fred was notified that he could not expect to receive any of the amount owed to him. In 2020 final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2020?

Answer 1

0$

Step-by-step explanation:

On June 2, 2018, Fred’s TV Sales sold Mark a large HD TV on account for $12,000. Fred’s TV Sales uses the accrual method. In 2019, when the balance on the account was $8,000, Mark filed for bankruptcy. Fred was notified that he could not expect to receive any of the amount owed to him. In 2020 final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2020

Debt is when a business is owing some money

This business has ran into loss. There was a bad debt recorded in 2019 to the tune of $8000. In 2020, there was a gain instead of a loss

Therefore, to get the balance we say gain minus loss

1000-0

which mens

$1000 gain and no loss in dollar

Answer 2

$0.

Step-by-step explanation:

This is business bad debt. Therefore, partial worthlessness can be recognized in 2019. The 2019 loss is $8,000. In 2020, the collection of $1,000 would produce a $1,000 gain ($1,000 - 0) rather than a loss.