Trade receivables reported in the books of ABC Ltd. as at 31 December 2008 amounted to Rs 208,500. An analysis of the number of day’s debts had been outstanding showed the given:
Days outstanding Rs
Within 30 days 124,500
Between 31 to 60 days 62,400
Beyond 60 days 21,600
After a review of all trade receivables balances, it was decided that an amount of Rs 3,600 outstanding for more than 60 days was definitely irrecoverable. Experience pointed that an allowance must be made of 2% of amount outstanding for between 31 and 60 days and 5 percent of amounts outstanding for more than 60 days.
REQUIRED:
Compute the amount to be written off as bad debts in the Income Statement and show how trade receivables will be reported in the Balance Sheet as at 31 December 2008.