ABC has a beginning allowance for doubtful accounts of $40,000. During the current year ABC added to the allowance an additional $10,000 based on current year sales activity. Also, during the year, ABC specifically identified and wrote off $12,000 of Receivables after exhausting all commercially reasonable remedies. Thus, the ending allowance for doubtful accounts is $38,000.

3—under the cash method what is ABC’s Bad Debt Expense?

4—under the accrual method for tax purposes what is ABC’s Bad Debt Expense?

5—under the accrual method for tax purposes what is the current year net book/tax difference? $12,000 -$10,000 = $2,000

6—under the accrual method for tax purposes what is the originating book/tax difference in the current year?

7—Further to Question 6—is it unfavorable or favorable?

8—under the accrual method for tax purposes what is the reversing book/tax difference in the current year?

9—further to Question 8—is it unfavorable or favorable?