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WAEC Financial Accounting 1996 Question 25

Question 25

Bad Debts and Provisions

The total debtors account of a trading concern is N13,000. Out of this 2 percent is irrecoverable; 5 percent of the balance is unlikely to be collected.
What is the provision for doubtful debts?

  1. A.N910
  2. B.N650
  3. C.N637
  4. D.N377
  5. E.N260
Show the answer and explanation

Answer: C (N637)

Explanation

Bad debt = 2% × N13,000 = N260, leaving N12,740. Provision = 5% × N12,740 = N637.