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confusion chapter number 8 and question number 3 … answer is C but how plz explain cant understand why 1,800 of previously written of debts is deducting from current year receivables
and what about specific allowance ? why not deducting it ???Yv Co’s trial balance shows a receivables’ account balance of $50,000, this includes the following:
(1) $2,500 from Mike who has gone into liquidation
(2) debts of $500 + $1,500 which are to be specially allowed for
(3) cash received from Ken of $1,800 which had previously been written off
(4) cash received from John of $2,900 which had previously been allowed for
What is the revised receivables figure?
A $52,200
B $50,200
C $49,300
D $45,500We never adjust receivables for an allowance – we create an allowance account but we do not adjust the receivables figure.
With regard to the 1800 received from Ken. Since it had been written off previously we should have DR cash CR Irrecoverable debts expense.
Since it has been include in the receivables account it means we must have CR receivables, which is wrong. To correct it, we need to DR receivables.
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