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Allowance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Allowance

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 7, 2021 at 6:11 am #619912
    Anonymous
    Inactive
    • Topics: 6
    • Replies: 3
    • ☆

    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 debit

    Hello,

    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 SOPL

    May 7, 2021 at 8:24 am #619943
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • ☆☆☆☆☆

    There 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.

  • Author
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