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11.2 At 31 December 20X2 a company’s receivables totalled $400,000 and an allowance for receivables of
$50,000 had been brought forward from the year ended 31 December 20X1.
It was decided to write off debts totalling $38,000. The allowance for receivables was to be adjusted to
the equivalent of 10% of the receivables.
What charge for receivables expense should appear in the company’s statement of profit or loss for the
year ended 31 December 20X2?
A $74,200
B $51,800
C $28,000
D $24,200answer is A. $50,000 was ignored because its a brought forward amount, meaning it was already deducted from the receivables amount?
The answer is not A at all – it is D (and D is the answer that is in the BPP Revision Kit for question 11.2 – why do you write that the answer is A ? !!!).
The irrecoverable and doubtful debts expense for the year is 24,200.
(The cost of writing off the irrecoverable debts of 38,000, less the reduction in the allowance of 13,800 (50,000 – 10% x (400,000 – 38,000))
Dear sir, if those debts 38,000 written off were previously made allowances for, so it should not be included in the soPL for the year????
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