Question 12
Bad Debts and ProvisionsA provision for bad debt account had ₦3,800 at the beginning of the year and ₦4,220 at the close of the year. If bad debts are calculated at the rate of 1/20 % of annual credit sales, what was the credit sales for the period?
- A.₦2,100,000
- B.₦844,400
- C.₦840,000
- D.₦500, 000.
Show the answer and explanation
Answer: C (₦840,000)
Explanation
The year's charge = 4 220 − 3 800 = 420. This is 1/20 % (0.05%) of sales, so sales = 420 ÷ 0.0005 = ₦840 000.