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At 1 November 20X9, Telway Co had an allowance for receivables of $90,000. At 31 October 20XO, its
trade receivables were $1,232,000 of which $60,000 was identified as unrecoverable and was written
off. Telway Co’s allowance for receivables has now been adjusted to the equivalent of 5% of remaining
trade receivables.
What amount should be recorded in the statement of profit or loss for the receivables expense for the
year ended 31 October 20XO?A $58,600 debit
B $28,600 debit
C $31,400 credit
D $118,600 debitHello,
This question is from BPP’s Revision kit. The correct anwer here is B. I don’t understand how they find that.
I calculated this as follows
(1 232 000-60 000) * 0.05 = 58 6000
90 000-58 600 = 31 400 credit to SOPLThere is an irrecoverable debt of $60,000 and so writing this off will be an expense in the SOPL and will be debited to the SOPL.
The change in the allowance is $31,400 as you have calculated, which will be credited to the SOPL.
Therefore there is a net expense debited to the SOPL of 60,000 – 31,400 = $28,600.
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