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This year William provided $4,200 of services to a large client on credit

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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.

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

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Deductible Amount$_____

Deductible amount $_________

Question 1 This year William provided $4,200 of services to a large client on credit. Unfortunately, this client has recently encountered financial difficulties and has been unable to pay William for the services. Moreover, William does not expect to collect for his services. William has "written off " the account and would like to claim a deduction for tax purposes. a. What amount of deduction for bad debt expense can William claim this year if he uses the accrual method? Deductible Amount$_____ b. What amount of deduction for bad debt expense can William claim this year if he uses the cash method? Deductible amount $_________ Question 2 Dustin has a contract to provide services to Dado Enterprises. In November of this year, Dustin billed Dado $10,000 for the services he rendered during the year. Dado is an accrual-method proprietorship that is owned and operated by Dustin’s father. a. What amount of revenue must Dustin recognize this year if Dustin uses the cash method and Dado remits payment and Dustin receives payment for the services in December of this year? What amount can Dado deduct this year? Amount recognized by Dustin $________ Amount deducted by Dado $_________ b. What amount of revenue must Dustin recognize this year if Dustin uses the accrual method and Dado remits payment for the services in December of this year? What amount can Dado deduct this year? Amount recognized by Dustin $_______ Amount deducted by Dado $________ C. What amount of revenue must Dustin recognize this year if Dustin uses the cash method and Dado remits payment for the services in January of next year? What amount can Dado deduct this year? Amount of revenue $_____ Deductible amount $______ d. What amount of revenue must Dustin recognize this year if Dustin uses the accrual method and Dado remits payment for the services in January of next year? What amount can Dado deduct this year? Amount recognized by Dustin $____ Amount deducted by Dado $___ Question 3 Nancy operates a business that uses the accrual method of accounting. In December, Nancy asked her brother, Hank, to provide her business with consulting advice. Hank billed Nancy for $8,700 of consulting services in year 0 (a reasonable amount), but Nancy was only able to pay $5,200 of the bill by the end of this year. However, Nancy paid the remainder of the bill in the following year. a. How much of the $8,700 consulting services will Hank include in his income this year if he uses the cash method of accounting? What amount can Nancy deduct this year for the consulting services? Amount included by Hank $____ Amount deducted by Nancy $___ b. How much of the $8,700 consulting services will Hank include in his income this year if he uses the accrual method of accounting? What amount can Nancy deduct this year for the consulting services? Amount included by Hank $____ Amount deducted by Nancy $___