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GK Company, a calendar year accrual basis taxpayer, made the following adjustments to its allowance for bad debts this year: January 1 allowance for bad debts $ 87,900 Actual write-offs of accounts receivable (79,100 ) Addition to allowance at year-end 91,800 December 31 allowance for bad debts $ 100,600 Compute GK's bad debt expense for financial statement purposes. Compute GK's tax deduction for bad debts.

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Answer: 1. $91,800

2. $79,100

Explanation:

1. The Bad Debt expense for the year refers to just how much of the Receivables the company has decided to write off for the year. The figure is simply the figure that is added to the Allowance for Bad Debts during the year.

That figure from the above question is $91,800.

2. GK's tax deduction for bad debts are those receivables upon which the company will not have to pay taxes on because as they were written off, they never received payment. They can't pay taxes, on money they never received. This amount will be the Actual amount of written off Receivables and from the question that figure is $79,100.

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