Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 75% of...

Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 75% of their face value and then attempts to collect these accounts. During the current year, Bob collected $86,000 on an account with a face value of $103,200.

Bob has ______ debt deduction. He has ________ of ________.

Expert Solution

1st fill in the blank: no bad

2nd fill in the blank: a gain

3rd fill in the blank: $8,600

Explanation:

This is the business Mr. B.

He paid = Face value × 75%

= 103,200 × 75%

= $77,400

He receives or collected = $86,000

Since the receiving is higher than payment, there is definitely a gain but no loss. Therefore, there is no bad debt deduction.

The amount of gain = Collection – Payment

= 86,000 – 77,400

= $8,600

ekkarill92 answered 2 years ago

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