Exercise 7:

After the store opening, the company successfully continues to trade and already started to provide premium customers with payment terms. on January 31, the company examines its Trade Receivables finds the following:

Current balance of Trade Receivables amounts to 89,250 (including 19% VAT)

This balance includes an amount of 16,660 due by one customer who became insolvent shortly before end of January; expected insolvency rate is 10 %,

Regarding the collectability c the remaining balance, the company assumes a default rate of 3%.

a) Which action should be taken to measure the Trade Receivables adequately in the balance sheet as per 31 January 2023? Please provide verbal description and calculate the amounts needed. Show the way how you calculate explicitly, only providing the calculated amount will not be scored.