- This topic has 4 replies, 2 voices, and was last updated 10 years ago by
.
- Posts
At 1 January 20X4, Tartar Co has a total receivable of $380,000. A specific allowance of $20,000 had been made for a business customer, Drab. The general allowance for receivable was 2.5%. During the year, Drab went out of business owing Tartar Co $ 28, 000, none of which is expected to be recovered. At 31 December 20X4, Tatar has total receivable of $420,000. There was no specific allowance but the general allowance for receivable was increased to 3%.
A $ 16,400
B $ 31,600
C $ 44,400
D $ 11,600I don’t get why the ans is D.
Allowance for receivable b/f is $29000
General allowance for 20X4
420 000-28000*0.03=11 760Irrecoverable expense acc.
Dr 28 000
Cr 17 240
Allowance for irrecoverable debt and bad debt in the stat of profit or loss $10 760What is the charge in the statement of profit or Loss for the year 31 Dec for the allowance for receivables and irrecoverable debts?
Are you sure that you have typed the question correctly?
If you have, then the answer is not D – your workings are correct.(Just a minor point, but you are getting your terminology confused. Irrecoverable debts is the proper name for bad debts. The allowance is ‘allowance for receivables’)
$
Specific allowance for receivables at 1 January 20,000
General allowance: 2.5% of (380,000-20,000). 9,000
29,000
General allowance at 31 Dec: 3% of 420,000. 12,600
Reduction in allowance for receivable. (16,400)
Irrecoverable debt written off 28,000
Combined expense in statement of profit or loss. 11,600This is the working in the text book. I double check the question I have typed it up correctly.
I do not know which text book you are using, but it is a very poor question.
Their answer assumes that the irrecoverable debt of 28,000 had already been written off during the year, and so the final receivables figure of 420,000 is after the debit had been removed.
However the question as you have typed it does not make that clear.
- You must be logged in to reply to this topic.