Question

In January 2014, Pelican, Inc., established an allowance for uncollectible accounts (bad debt reserve) of $70,000 on its books and increased the allowance by $120,000 during the year. As a result of a client's bankruptcy, Pelican, Inc., decreased the allowance by $60,000 in November 2014. Pelican, Inc., deducted the $190,000 of increases to the allowance on its 2014 income statement, but was not allowed to deduct that amount on its tax return. On its 2014 tax return, the corporation was allowed to deduct the $60,000 actual loss sustained because of its client's bankruptcy. On its financial statements, Pelican, Inc., treated the $190,000 increase in the bad debt reserve as an expense that gave rise to a temporary difference. On its 2014 tax return, Pelican, Inc., took a $60,000 deduction for bad debt expense. How is this information reported on Schedule M-3?


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  • CreatedMay 25, 2015
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