Trade receivables calculated from 5% doubtful debts provision

Steps:

• Identify the provision for doubtful debts as $500, a contra-asset account.
• Recognize that this provision typically represents 5% of gross trade receivables.
• Set up the formula: Gross trade receivables × 0.05 = $500.
• Solve: Gross trade receivables = $500 ÷ 0.05 =$10,000.

Why B is correct:

• Gross trade receivables equal $10,000, derived from the standard formula where provision = 5% of gross amount owed by customers.

Why the others are wrong:

• A: $9,500 implies a$475 provision (5% of $9,500), not$500.
• C: $12,000 implies a$600 provision (5% of 500.

Final answer: B