The following information is from the financial records of the Adham Corporation at the end of the

Question:

The following information is from the financial records of the Adham at the end of the year:
Accounts receivable ......... $450,000
Allowance for bad debts account ..... (34,000)
Net ....... $416,000

The allowance for bad debts account is based on an aging of the corporation’s At the end of the year, the allowance for bad debts account was increased from $7,000 to $34,000. During the year, $8,000 of the was specifically identified by the company as uncollectible and written off.
a. If Adham’s bad debts arise from the sale of merchandise, how should the adjustments to the allowance for bad debt accounts be reported for tax purposes?
b. If Adham uses the cash method of accounting and the bad debts expense arises from providing counseling advice, how should the adjustments to the allowance for bad debt accounts be reported for tax purposes?

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