PRC-1 · Chapter 5 · Question 16 of 100
At year-end, 'Prime Distributors' has a Receivables balance of Rs. 150,000. A debt of Rs. 10,000 needs to be written off as bad. 'Prime' then wishes to create a 5% general allowance on the remaining balance. What is the value of the closing allowance for doubtful debts?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 7,000
Explanation
First, deduct the bad debt: 150,000 - 10,000 = Rs. 140,000. Next, apply the 5% general rate to the remaining balance: 140,000 x 5% = Rs. 7,000. This is the required closing allowance.
More Bad and Doubtful Debts MCQs
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