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Trade receivables as at 31 December 20X1 were $25,000. The bad debt provision as at 1 January 20X1 was $812. During the year to 31 December 20X1 bad debts of $2,000 have been written off to administration expenses. After the year end, but before the accounts had been completed, the entity discovered that a major trade receivable had gone into liquidation and that their outstanding balance of $3,000 was very unlikely to be paid. As a result of the recent bad debt experience the directors have decided to increase the bad debt provision at 31 December 20X1 to 5 per cent of outstanding trade receivables.
What is the correct balance for trade receivables, net of bad debt provision, as at
31 December 20X1?
What is the correct charge to the income statement for bad debts and bad debt provisions for the years to 31 December 20X1?
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