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Apple has her own business selling dolls. At 30 june 2013 she has a bal on her trade receivables $62900.
A balance of $2000 due from X co is considered irrecoverable and is to be w/o. Y co was in financial difficulty and Apple wishes to provide an allowance for 60% of their bal of $1600. She has also decided to make a general allowance for receivables of 10% of her remaining trade receivables.Whats the allowance for receivables in her statement of financial position at 30 june 2013?
WORKING
TRADE RECEIVABLES 62900
BAD DEBT FROM X CO (2000)
Y CO FOR SPECIFIC PRO (1600) 3600
NET DEBTORS FOR GENERAL
PROVISION 59300 X 10% = 5930
SPECIFIC PROVISION FOR Y CO 1600 X 60% = 960
TOTAL PROVISION 6890SOFP
DEBTORS 60900 (62900-2000)
PROVISION (6890)
NET DEBTORS 54010Im still slightly confused , @JohnMoffat would you be clarify this question please?
muhunwar’s answer is correct (except for using old terminology) and it is the same as I explained in answer to your previous post.
There is a specific allowance for Y of 60% x 1600 = 960.
In addition there is a general allowance of 10% of the remaining debts. In the question, receivables are 62900. However X is irrecoverable and so that leaves 62900 – 2000 = 60900.
Y has been specifically provided for, so this leave 60900 – 1600 = 59300.So the general allowance is 10% x 59300 = 5930.
So the total allowance for receivables (specific + general) is 5930 + 960 = 6890
muhunwar: Thanks for answering, but please do not answer in this forum – it is Ask the ACCA Tutor forum, and you are not the tutor 🙂
Please restrict your answers to the general F3 Forum.Dear John,
Why we deduct Y spesific allowance on above qws? What is this rule on f3? I think we assume it as irrecoverable debt
The question specifically says that a specific allowance is needed. That means that it is a doubtful debt (or in this case that 60% is doubtful). An irrecoverable debt it where we feel certain that we will not get the money.
Have you watched the free lecture on irrecoverable and doubtful debts? If not then I think you might find it helpful.
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