A business maintains an allowance for irrecoverable debts of 5% of trade receivables. At the end of the current financial year, trade receivables totalled ＄8000 which was 20% less than the year before.
How will the profit for the current financial year be affected by the change in the allowance for irrecoverable debts?
1 )
decrease by ＄100
2 )
decrease by ＄400
increase by ＄100
4 )
increase by ＄400
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