Question

Negan, a cash basis sole proprietor, provided $12,000 worth of services in 2016 to his customer Michonne. Michonne did not pay for the services in 2016 or 2017 and Negan is certain in 2018 that he'll never receive the payment. On his 2018 Schedule C, Negan can take a deduction for bad debts in the amount of

A. 12,000

b. 0

c. 6,000

d. 12,000 + int.

Ivanka, a sole proprietor, takes her client to dinner and a concert immediately after a day of meetings spent discussing the client's accounts. The total cost of the dinner was $124 and the cost of the concert was $210. How much of the amounts spent on dinner and the concert will Ivanka deduct on her 2018 Schedule C?

a. 124

b. 167

c. 334

d. 62

Answer 1

ANSWER = B - 0.

EXPLANATION = In cash basis accounting we record the revenue when we receive the cash. In the given case Negan provided the service in 2016 and did not received the cash and so no Entry is made on books for such service. So when there is no entry in books which means no revenue has been recorded and so there is no question of bad debts deduction as expenses

ANSWER = B- 167

EXPLANATION = As per schedule C there is 50% deduction allowable on the certain expenses which includes Meals and entertainment.

So in the given case Both the expenditure is allowable upto 50% i.e. 50% * ($124 + $ 210) i.e. $167

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