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(Sorry, can not find ‘Ask the Tutor’ forum for F3…)
Can you please help with the following question?
As at 30 June 20X0
Rec’ble ledger control a/c – $76350 Dr
Allowance for rec’ble – $5250 Cr (b/f 1 Jul 19X9)
Irrecoverable debt expense – $2650 DrFurther adjustments:
1) No entries have been made in respect of cash of $7750 received from Simon whose bal was w/off last year
2) At 30 June 20X0, 50% allowance is required against balance of $6500 due from Jon as well as general allowance of 2% of remaining debts.The irrecoverable debts credit in Income statement is:
a) $2453
b)$5703
c)$4497
d)$5638Answer is b – $5703
Did not understand how…? Also can I attach screen shot of my query to save writing the whole question?
ThanksMake the t accounts yourself for allowance and IDE and you should see how it works out.
1. For the recovered write off. dr cash cr IDE 7750
2. Deal with the specific allowance. = 3250
3. Calculate total of remaining receivables (this is where I went wrong first time round, by only deducting 3250 from 76350, but it says the remaining debts so the whole 6500 should not be included in calculating the general allowance)
= 76350-6500
4. Calculate the general allowance for the remaining receivables = (76350-6500) x 0.02 = 1397
5. So total allowance = 3250 + 1397 = 4647This goes to Allowance t acc and needs a dr of 603 to make the adjustment so: dr allowance 603 cr IDE 603
So IDE has 2650 dr and 7750 + 603 cr, so to close and balance this account we dr To IS 5703.
This would be a credit on the Income Statement, and is seen as a negative expense.If you are still stuck let me know where and I will go over it in more detail.
Yes please… Can you explain the bit about specific allowance?
Why are we not taking 50% of the balance of $6500 for the specific allowance?Thanks.
(Have you passed F3? Any tips?)
The opentuiton lecture for for this chapter is very useful.
https://opentuition.com/acca/f3/acca-f3-lectures/We do take 50% of 6500 for the specific allowance. To clacluate the general allwoance we disregard 100% of the 6500, because that debt is dealt wiht by the specific allowance.
Think of it this way:
76350 is the total debts owed to us.
Break this down into the 6500 from jon and the remaining debts is then 69850.
For the 6500 debts we have to make a specifc allowance of 50% which is 3250. In other words, what the question is saying is that we doubt that jon will pay 50% of the money he owes us so we have to make specific allowance for that.
Then we also have to make a general allowance for the remaining debts, so 69850 x 2%.I havent taken the exam yet for F3 but have finished studying it pretty much.
Yeah…makes all sense now! Thanks so much ever!
Which study text are you following? How have you prepared for the exam and have you been preparing for long?
Sorry for loads of question…Your welcome, it helps me revise :p
I worked through the kaplan F3 text which went ok, but then did the kaplan exam kit and found that the kaplan text didnt prepare me properly and kept getting stuck on questions, so I started working through the opentuition free lectrue videos and they are ideal. With hindsight if you have zero bookkeeping or accounting knowledge to begin wiht then the way to go is watch the videos first then use the kaplan study text to fill in any gaps afterwards, then work though an exam kit.
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