Hi! I have two question
(1) A reported net receivables of $12,000 at 31 December 20X5. During 20X6 he made sales on credit of $ 125,000 and received cash from credit customers amounting to $ 115,000. At 31 December 20X6, A wished off debts of $ 7,100 and increase the allowance for receivables by $ 950 to $ 2,100. What is the net receivables figure at 31 December 20X6?
In this question I have calculated and got several answer, so please explain which answer is the best answer in this question.And also please explain what mean of net receivables.
(2) In the year ended 30.09.20X8, B had sales of $ 7,000,000. Year end receivables amounted to 5% of annual sales. B wishes to maintain the allowance for receivales at 4% of receivables and as result discovers that the allowance is 20% higher than at the previous year end.
During the year irrecoverable debts amounting to $ 3,200 were written off and debts amounting to $ 450 and previously written off were recovered.
What is the irrecoverable debt expense for the year.
In this question the irrecoverable debts should direct deduct to receivales amounted to 5% of annual sales?
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10y ago#1Does the book in which you found the questions not also have answers?!
Q1
Since you are given net receivables at the start of the year (I.e. Receivables less the allowance), the net receivables at the end of the year are:
12000 + 125000 - 115000 - 7100 - 950
10y ago#2Q2
The expense for the year is always:
The cost of any irrecoverable debts + the increase in the allowance - any irrecoverable debts recovered.
I do suggest that you watch our free lectures on this.
Can you show me the calculation for Q2
Thank you
10y ago#4The allowance at the end of the year is 4% x 5% x 7M = 14,000
This is 20% higher than at the start of the year, and so the start of the year was 100/120 x 14,000 = 11,667. So the increase is 2,333
So the expense for the year is 2,333 + 3,200 - 450
(Are you sure the question said 20% higher, and not 40% higher? If it says 40% higher, then the increase in the allowance is 4,000 instead of 2,333. )
As at 31/12/2014 Rodney had bad debts which amounted to £230.
A further bad debts of £130 is to be written off and the bad debts privision is to be at 5% of receivables after the write-off. Receivables were £6,570.
my question is how do i account for this transaction in both income statement and statement of financial position? Please help
10y ago#6I don't know where you found this question, but the terminology is very out of date. Bad debts are called irrecoverable debts, and provision is called allowance for receivables.
Receivables are 6750 - 130 = 6620.
Allowance for receivables = 5% x 6620 = 331
So net receivables on the SOFP = 6620 - 331
It is not possible to calculate the expense in the SOPL, because you have not typed what the allowance was at the start of the year.
Have you watched the free lectures on irrecoverable and doubtful debts?
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