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John has receivables totalling £20,000 after writing off bad debts of £600, and an allowance for doubtful debts brought forward of £1,200. He wishes to carry forward an allowance equal to 5% of receivables. What is the effect on profit of adjusting the allowance? £600 decrease £200 decrease £200 increase £400 increase

John has receivables totalling £20,000 after writing off bad debts of £600, and an allowance for doubtful debts brought forward of £1,200. He wishes to carry forward an allowance equal to 5% of receivables. What is the effect on profit of adjusting the allowance? £600 decrease £200 decrease £200 increase £400 increase

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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John has receivables totalling £20,000 after writing off bad debts of £600, and an allowance for doubtful debts brought forward of £1,200. He wishes to carry forward an allowance equal to 5% of receivables. What is the effect on profit of adjusting the allowance? £600 decrease £200 decrease £200 increase O£400 increase
Transcribed Image Text:John has receivables totalling £20,000 after writing off bad debts of £600, and an allowance for doubtful debts brought forward of £1,200. He wishes to carry forward an allowance equal to 5% of receivables. What is the effect on profit of adjusting the allowance? £600 decrease £200 decrease £200 increase O£400 increase
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