Pls can someone help me out with this question. I am stuck on it.
Q. At the start of the year Joe had an allowance of $700 against receivables.
During the year $450 of this amount went bad and $150 was received; the balance remained unpaid at the year end.
At the year end it was decided to provide for a new debt of $240.
What was the total charge to the statement of profit or loss for irrecoverable debts and allowances for the year?
A $450
B $90
C $300
D $690
If someone can let me know the answer to this question and how they arrived at it.
Thanks
CIMA Forums
BA3 - Irrecoverable Debt and Allowance for Depreciation question
If you look here you'll see an old version of the same question https://opentuition.com/topic/irrecoverable-debts-and-allowances-2/
The only difference is that there is not another $170 going bad - so the answer would be B $90.
Total expense = Any debts written off during the year +/- allowance expense (or write back)
The write off we know is $450.
For the allowance expense, it may help to think of a T a/c:
Opening allowance +/- expense/write-back = Closing allowance
Op bal is $700. Cl bal is 700 - 450 - 150 + 240 = $340
i.e. the allowance is reduced by $360 - so this is a write-back (credit) to profit or loss.
The correct answer is therefore B $90 ($450 - $360).
Thanks
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