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QUESTION 5 ABC plc had net accounts receivables in the amount of 420...

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Accounting

QUESTION 5
ABC plc had net accounts receivables in the amount of 420 millions and 765 millions on
31 December 2019 and 31 December 2020, respectively. In 2020, ABC plc had total credit
sales of 3,000 millions. On 31 December 2020,ABC plc reported the following in the notes
for its allowances for doubtful accounts:
An analyst decides that ABC's allowance for doubtful accounts as a percentage of gross
accounts receivables in 2020 was too low and it should have been the same as that in 2019.
Assume a tax rate of 30%. What should the adjustments to ABC plc's 2020 balance sheet
and income statement be? Show your calculations step by step.
[3 marks]
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