In the 2020 fiscal year, Company A recognized $10 of bad-debt expense (as well as the same amount of bad-debt allowance) for its Accounts receivable. There was no bad debt written-off in the same year. The corporate tax rate is 30%.

Required:

Assuming all else equal, discuss the effect of the recognition of the $10 bad-debt expense on the following two tax-related accounts:

Current tax liability

Deferred tax asset (or deferred tax liability)

You need to relate your discussions to the current tax worksheet as well as deferred tax worksheet.

Answer rating: 100% (QA)

Bad debt expense is a deductible expense when estimated liability provision is made in account... View the full answer