Provision for the bad debt at 4% of sundry debtors: Calculate the provision to be taken to the balance sheet?

Use the information below to answer questions
Sundry debtor………………N20,000
Provision for bad debts……..N500
Provision for the bad debt at 4% of sundry debtors.

Calculate the provision to be taken to the balance sheet?

Correct Answer: Option B

Explanation

The business owner made a provision of 500 as bad debt. Total debt owed was 20,000. At the end of the period, bad debts was 4%. Hence we have;

4% x 20000
0.04 x 20000 = 800