FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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**Text Transcription for Educational Website**

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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.)*

b. What amount of deduction for bad debt expense can William claim this year if he uses the cash method?

[Blue box labeled "Deductible amount"]

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**Explanation:**

This text describes a scenario in which William is facing a bad debt situation. Under the cash accounting method, revenues are only recognized when cash is actually received. Therefore, for tax deduction purposes, William needs to assess if any part of the $4,200 he expected to receive can be deducted as a bad debt expense. If using the cash method, and since no payment was received, William would typically record the deduction as zero.

The blue box is an input field for entering the deductible amount, emphasizing the scenario's application or accounting practice.
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Transcribed Image Text:**Text Transcription for Educational Website** --- 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.)* b. What amount of deduction for bad debt expense can William claim this year if he uses the cash method? [Blue box labeled "Deductible amount"] --- **Explanation:** This text describes a scenario in which William is facing a bad debt situation. Under the cash accounting method, revenues are only recognized when cash is actually received. Therefore, for tax deduction purposes, William needs to assess if any part of the $4,200 he expected to receive can be deducted as a bad debt expense. If using the cash method, and since no payment was received, William would typically record the deduction as zero. The blue box is an input field for entering the deductible amount, emphasizing the scenario's application or accounting practice.
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