CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange
Mehta Traders holds a bill for ₹80,000 accepted by Joshi, who is declared insolvent. The bill was retained until its due date. Joshi's estate pays 40 paise in the rupee. What is the bad debt Mehta Traders must write off?
Mehta Traders writes off ₹48,000 as bad debt. The insolvent acceptor's estate pays 40 paise per rupee, so ₹32,000 is recovered from ₹80,000, and the remaining 60 percent, ₹48,000, is the irrecoverable loss.
- A₹32,000
- B₹48,000Correct
- C₹40,000
- D₹80,000
Explanation
The estate pays 40% of ₹80,000, which is ₹32,000 received. The loss is the unpaid 60%, so ₹80,000 − ₹32,000 = ₹48,000. The figure ₹32,000 is the amount received, not the loss.
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