D Trucking uses the accrual method of accounting. Below is a reconciliation of D
ID: 2502025 • Letter: D
Question
D Trucking uses the accrual method of accounting. Below is a reconciliation of D Trucking's allowance for bad debts for the current year.
Beginning allowance for bad debts
$61,150
Actual write-offs of accounts receivable during the year
(70,000)
Addition to allowance
90,500
Ending allowance for bad debts
$69,650
Considering the difference between the GAAP and the tax rules for accounting for bad debts, calculate D Trucking’s temporary excess of taxable income over book income.
Beginning allowance for bad debts
$61,150
Actual write-offs of accounts receivable during the year
(70,000)
Addition to allowance
90,500
Ending allowance for bad debts
$69,650
Explanation / Answer
Tax deduction is $20,500 ($90,500 - $70,000) less than its book expense. So, its taxable income is $ 20,500 more than book income. The difference is temporary.
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