[giovannimenon]

the sales revenue of J co was $ 2 million and its receivables were 5% of sales. J Co wishes to have a specific allowance for receivables of $4000 which would make the allowance 1/3 higher than the current assets.

The correct answer is 4000 x 3/4 = 3000

4000 -3000 = 1000 ( profit reduced )

Why did they multiplied by 3/4 rather than by 1/3 ?

Thanks

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