FAallowance & irrecoverable debts

the answer is (D) $11600. but my calculation was, opening allowance=20000+(380000-20000)X2.5%=29000. closing allowance=(420000-28000)X3%=11760. SOPL: irrecoverable debt-decrease in allowance=(28000-17240)=10760(my answer) #why they didnt deduct the irrecoverable debt from the total receivables before calculating general allowance?? #as in the question it is not mentioned that irrecoverable debt is written off..so we should write off it first.. sir plz help!!

opening allowance = 20000+(380000 - 20000)x 2.5% = 9500 closing allowance = ( 420000 - 28000)x3% = 11760 SOPL = 9500 - 11760 = 2,260 Because the difference between the opening allowance less the closing allowance is what we charge SOPL

In the interest of ensuring you properly understand the reasoning, let me break it down for you. At 1 Jan 2014 (actually 31 December 21013) the following obtains. 1. Receivable = 380,000 2. Specific allowance = 20,000 3. General allowance = (360,000 - 20,000)*2.5% = 9,000 4. Total allowance = 20,000 + 9,000 = 29,000 At 31 Dec 2014 1. Impaired receivable = 28,000 2. Receivable = 420,000 (this is net of the impaired receivable amount since it is known that this amount is virtually uncollectible.) 3. General allowance = 420,000 * 3% = 12,600 4. Total Allowance = 28,000 + 12,600 = 40,600 Reconciliation 1. Opening balance of allowance = 29,000 2. Closing balance of allowance = 40,600 3. Charge to P&L = 40,600 - 29,000 = 11,600 I hope this helps.