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  1. avatar says

    Good Morning,
    I understand how to apply this. However, some questions do not seem to specify if the Irrecoverable debt has been written off, or trade receivable is net of irrecoverable debts.So when calculating the entry on P/L, I am not sure whether to deduct the Irrecoverable debt and then caluclate the Allowance based on the balance, plus the irrecoverable debt; or to calulate on the total TR. EG.
    Irrecoverable debts are $5000. Trade Receivables are $120,000. An allowance of 5% is required. What is the entry for Irrecoverable debts and allowance for receivable on the P/L?
    a.$5000
    b.$11000
    c.$6000
    d.$10750
    In the first instance : ((120,000 – 5000 ) x 5%) + 5000 = 10750 (a)
    or
    5000 + (120,000 x 5%) = 11,000

    The correct answer is b. I was torn between both and opted for d, But I do not want to lose 2 marks for this! How do I know when to apply the caluculation to the total figure, or net of irrecoverable debts. There seem to be question of both types.
    Many Thanks John.

    • Avatar of John Moffat says

      In the exam they will make it clear, but you have to be very careful with the wording. If it says that they ‘had been written off’ or that ‘they were written off during the year’ then they have already been removed from the balance. If it says ‘it was decided to write off’ then they have not yet been removed.
      Hope that makes sense :-)

      • avatar says

        Thank you John. I hope it will be clear in the exam. The question above did not seem clear and it was from BPP. I will read the question very carefully regardless, and hope for the best!

  2. avatar says

    can someone please help with this question
    Venus acquired 75% of mercury co $100000 $1ordinary share capital on Nov 1 2011. the consideration of mercury$2 cash per share and $1 share in Venus for every 1share acquired in mercury co.
    Venus co share have a nominal value of $1and a fair value of and$1.75.the fair value of nci was $82000 and fair value of of net asset was$215500.what should recorded as goodwill acquisition if Venus co in the consolidated financial statement

    • Avatar of John Moffat says

      Calculate the total that Mercury was valued at – the cash plus the fair value of the shares in Venus plus the fair value of the NCI.

      Subtract from this the fair value of the new assets.

      The difference is the goodwill arising on consolidation.

      (Please do not ask questions about consolidations under a lecture on irrecoverable debts. Either ask in the F3 general forum, or in the F3 Ask ACCA Tutor forum)

  3. avatar says

    Good Afternoon
    I am asking for your assistant for the question below. I state the answer I got but I am not sure how they got the correct answer.
    3. Apple owns her own business selling dolls to stores. At 30 June 2008 she had the following balances in her books:
    Trade receivables: 62,900
    Allowance for receivables: (900)
    A balance of $2,000 due from X Co is considered irrecoverable and is to be written off. Y Co was in financial difficulty and Apple wished to provide an allowance for 60% of their balance of $1,600. She also decided to make a general allowance for receivables of 10% of her remaining trade receivables.
    What was the allowance for receivables in her Statement of Financial Position at 30 June 2008?
    ? $6,890 but this is the correct answer
    ? $6,954 This was the answer I selected
    ? $7,090
    ? $7,530

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