Question: In January 2015 Pelican Inc established an allowance for uncollectible

In January 2015, Pelican, Inc., established an allowance for uncollectible accounts (bad debt reserve) of $70,000 on its books and increased the allow-zzz ance by $120,000 during the year. As a result of a client’s bankruptcy, Pelican, Inc., decreased the allowance by $60,000 in November 2015. Pelican, Inc., deducted the $190,000 of increases to the allowance on its 2015 income statement but was not allowed to deduct that amount on its tax return. On its 2015 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 2015 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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  • CreatedSeptember 09, 2015
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