Question

At the beginning of the year, Manley's firm had an allowance for doubtful accounts with a balance of $13,700. At the end of the year, Manley recorded bad debt expense of $21,000 and the balance of doubtful accounts had increased to $20,000. What is Manley's deduction for bad debt expense this year

Answer 1

Manley's deduction for bad debt expense this year would be $7,300.

To determine this, you need to calculate the net increase in the allowance for doubtful accounts:

Net increase in allowance = Ending balance of doubtful accounts - Beginning balance of doubtful accounts
Net increase in allowance = $20,000 - $13,700
Net increase in allowance = $6,300

Then, you can calculate the amount of bad debt expense that was actually recorded during the year:

Bad debt expense recorded = $21,000

Finally, you can calculate the deduction for bad debt expense:

Deduction for bad debt expense = Bad debt expense recorded - Net increase in allowance
Deduction for bad debt expense = $21,000 - $6,300
Deduction for bad debt expense = $7,300

Therefore, Manley's deduction for bad debt expense this year would be $7,300.