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As of January 1, 2017, the reserve for doubtful debts was $ 49,000. As of December 31, 2017, trade accounts receivable was $ 863,000. After its analysis, it was decided to write off $ 23,000 in debt as uncollectible and adjust the provision for doubtful debts to 5% of the remaining accounts receivable debt.
What will be the amount of expenses for bad and doubtful debts in the company’s income statement for the year ended December 31, 2017?
A)16000
B)65000
C)30000
D) 16150
Sir, can you help me pleaase! In this question
(863 000-23 000)x 5%=42000
49000-42000=7000
23000-7000=16000
But why we are not adding 7000 to 23000.Both these figures are not expenses for doubtful debts?The allowance for receivables is being reduced by 7,000 and this is therefore a ‘negative’ expense and reduces the total expense.
You really should watch my free lectures on irrecoverable and doubtful debts.
(Also, is seems that you must be using an old book because the terminology has changed. We do not call it a reserve or provision for doubtful debts – it is now called an allowance for receivables. I do suggest that you buy a current edition of a Revision Kit from one of the ACCA approved publishers.)
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