Answer to Question #129588 in Statistics and Probability for Nahashon Kimathi

Question

E Chivers commenced business on 1 January 2016 and makes his accounts to 31 December
every year. For the year ended 31 December 2016, bad debts written off amounted to Sh. 12,000.
It was also found necessary to create a provision for bad debts of Sh. 20,000.
In 2017, debts amounting to Sh. 16,000 proved bad and were written off. Mrs A. Allen, whose
debt of Sh. 3,500 was written off as bad in 2016, settled her account in full on 30 November
2017. As at 31 December 2017, total debts outstanding were Sh. 560,000. It was decided to bring
the provision up to 5% of this figure on that date.
In 2018, Sh. 23,500 debts were written off during the year and another recovery of Sh. 1,500 was
made in respect of debts written off in 2016. As at 31 December 2018, total debts outstanding
were Sh. 420,000. The provision for doubtful debts is to be maintained at 5% of this figure.
You are required to prepare for years 2016, 2017 and 2018 the
A) Extract from the profit and loss account (2.5 Marks)

Answer 1

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