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allowance

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

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • May 26, 2015 at 3:26 pm #249210
    Steven
    Member
    • Topics: 22
    • Replies: 15
    • ☆

    At 30 June 20X5 a company’s allowance for receivables was $39,000. At 30 June 20X6 trade receivables totalled $517,000. It was decided to write off debts totalling $37,000 and to adjust the allowance for receivables to the equivalent of 5% of the trade receivables based on past events.

    Sir please help as I am getting these questions incorrect all the time 🙁

    May 26, 2015 at 5:00 pm #249269
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I assume that the question asks for the expense for the year?

    If it does, then it is always:

    Cost of writing off irrecoverable (here 37,000) plus any increase in the allowance (or less any decrease in the allowance).

    The allowance needed at the end of the year is 5% x (517,000 – 37,000) = 24,000.
    The allowance at the end of last year was 39,000. So we need to reduce it by the difference of 15,000.

    So the total expense is 37,000 – 15,000 = 22,000.

    May 27, 2015 at 6:30 am #249407
    Steven
    Member
    • Topics: 22
    • Replies: 15
    • ☆

    Thanks

    May 27, 2015 at 9:11 am #249481
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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