Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 75% of their face value and then attempts to collect these accounts. During the current year, Bob collected $66,800 on an account with a face value of $80,160.
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- ASLEY is in the business of purchasing accounts receivable from businesses at a discount and then collecting them. Last year, she purchased a $30,000 account receivable for $25,000. This year, the account was settled for $25,000. How much loss can Peggy deduct and in which year? a.$5,000 for the prior year. b.$5,000 for the prior year and $5,000 for the current year. c.$5,000 for the current year. d.$-0- for the current year.Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 70% of their face value and then attempts to collect these accounts. During the current year, Bob collected $75,200 on an account with a face value of $90,240. Bob has debt deduction. He has of $fill in the blank 3.Sally is in the business of purchasing accounts receivable. Last year, Sally purchased an account receivable with a face value of $80,000 for $60,000. During the current year, Sally settled the account, receiving $65,000. Determine the maximum amount of the bad debt deduction for Sally for the current year. If an amount is zero, enter "0". Sally's basis in the account receivable is $fill in the blank 1 . Therefore, she has a bad debt deduction of $fill in the blank 2 and income of $fill in the blank 3 .
- Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company's financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2018, its first year of operations, Trevorson Electronics sold $28,400 of services on account. The company collected $25,200 of these receivables during the year, and Jon believed that the remaining $3,200 was fully collectible. In 2019, Jon discovered that none of the $3,200 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,100 of services during the year. Required: 1. Prepare journal entries to record the transactions in 2018 and 2019. 2-a. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2018 and 2019. 2-b. Was 2018 really as profitable as indicated by its income statement? 2-c. Was 2019 quite as bad as indicated by its income…Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company's financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2018, its first year of operations, Trevorson Electronics sold $28,400 of services on account. The company collected $25,200 of these receivables during the year, and Jon believed that the remaining $3,200 was fully collectible. In 2019, Jon discovered that none of the $3,200 would be collected, so he wrote off the entire amount. To make matters worse, Jon sold only $5,100 of services during the year. Required: 1. Prepare journal entries to record the transactions in 2018 and 2019. 2-a. Using only the information provided (ignore other operating expenses), prepare comparative income statements for 2018 and 2019. 2-b. Was 2018 really as profitable as indicated by its income statement? 2-c. Was 2019 quite as bad as indicated by its income…Sandra, a cash-basis taxpayer, operated a pet store on the cash method of accounting. She lent $4,500 to a friend but then forgave the loan. She also wrote off an account receivable of $2,200 that became uncollectible. She had to pay $8,000 on a supplier’s debt that she guaranteed in order to maintain a source of inventory. What is Sandra’s business bad debt expense? (a) $2,200 (b) $4,500 (c) $8,000 (d) $10,200 Choose the correct answer and defend your choice in 2-3 sentences.
- This year William provided $4,200 of services to a large client on credit. Unfortunately, this client has recently encountered financial difficulties and has been unable to pay William for the services. Moreover, William does not expect to collect for his services. William has "written off " the account and would like to claim a deduction for tax purposes. (Leave no answers blank. Enter zero if applicable.) a. What amount of deduction for bad debt expense can William claim this year if he uses the accrual method? Deductible amountAlthea writes a check to Handy Dan's Home Repair for $59.75 to cover the cost of having a window repaired in her home and gives the check to Dan, the owner of Handy Dan's Home Repair. Dan alters the check by changing the amount to $559.75. Dan then takes the check to Home Federal Savings and Loan, the bank on which the check is drawn, and cashes the check. This, of course, results in an extra $500 being withdrawn from Althea's account. Home Federal Savings and Loan will be responsible for: issuing a stop payment order on the check. debiting Althea's account $559.75, the entire amount of the check. debiting Althea's account for nothing. Because the check was altered, Althea is not entitled to any reimbursement. debiting Althea's account $500.Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year: Rent Bribes Travel expenses Utilities Wages Payroll taxes Property insurance Illegal kickbacks $33,500 50,250 3,350 20,100 248,000 16,750 1,675 30,150 What are Vella's total deductible expenses for tax purposes?
- Sally is in the business of purchasing accounts receivable last year Sally purchased an account receivable with a face value of 83,000 for 60,000. During the current year, Sally settled the account, receiving 65,000. Determine the maximum amount of the bad debt deduction for Sally for the current year.Joy incurs the following expenses in her business. When can she deduct the expenses if she uses the accrual method of accounting? the cash method? a. Joy rents an office building for 750 a month. Because of a cash flow problem, she is unable to pay the rent for November and December 2019. On January 5, 2019, Joy pays the 2,250 rent due for November, December, and January. b. Joy borrows 60,000 on a 1-year note on October 1, 2019. To get the loan, she has to prepay 6,200 in interest. c. Joy owes employees accrued wages totaling 20,000 as of December 31, 2019. The accrued wages are paid in the regular payroll on January 5, 2020. d. Joy purchases 2,400 worth of supplies from a local vendor. The supplies are delivered on January 29, 2019. They are fully used up on December 30, 2019. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2020, and is promptly paid. e. While at a trade convention, Joy purchases some pens and paperweights to send out as holiday gifts to her clients. She charges the 700 cost to her credit card in December 2019. She pays the credit card bill in January 2020.Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician whoinstalls wiring in new homes. Because the company’s financial statements are prepared only for taxpurposes, Jon uses the direct write-off method. During 2015, its first year of operations, TrevorsonElectronics sold $30,000 of services on account. The company collected $26,000 of these receivables during the year, and Jon believed that the remaining $4,000 was fully collectible. In 2016,Jon discovered that none of the $4,000 would be collected, so he wrote off the entire amount. Tomake matters worse, Jon sold only $5,000 of services during the year.Required:1. Prepare journal entries to record the transactions in 2015 and 2016.2. Using only the information provided (ignore other operating expenses), prepare comparativeincome statements for 2015 and 2016. Was 2015 really as profitable as indicated by its incomestatement? Was 2016 quite as bad as indicated by its income statement? What should Jon…