FA BPP Revision Kit Allowance 11.13

The answer is correct at $650. You can get the same answer in two ways. If you want to do it your way, the $100 was removed during the year from the allowance brought forward of $850, which leave a balance of $750. They question says that they want to end up with an allowance of $1,000 which means increasing the balance by $250. In addition they wrote of another $400 during the year, and so the total expense is $650. More efficiently is to write of all of the debts of $500 without touching the allowance. That means the balance is still $850 and it needs increasing to $1,000, so an expense of $150. Therefore the total expense is 500 + 150 = $650. Do watch my free lectures on irrecoverable and doubtful debts where all this is explained. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

I had assumed the “$100 previously included in the allowance” meant before the beginning of the year in another past accounting year, now being mentioned as a reference for the question, and that the $850 allowance in the beginning of the year was after the removal of $100 was taken care of. So I was just focusing on the impact of the past charges of the $100. Thanks sir. Sometimes misunderstanding the question makes us loose half the scores.

We rely on you for swift help when cornered. Grateful, thankyou.

You are welcome :-)