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Qs) At 31 Decembet 2005 the ledger of X Co. inculeded a $5376 allowance for recevable.During the year ended 31 december 2006 irrecoverable debts of $ 2040 were written off. Recevable blance at 31 december 2006 totalled 173,760 and the company wished to carry forward a genral allwance of 2%.
The Total Charge for irrecoverable debts and allownce for receivable in the 2006 income statement is :
a)$98.40
b)$139.20
c)$3904.80
d)$5515.20D
173760*0.02=3475.2
3475.2+2040=$5515.2Note:the irrecoverable debt of $2040 was not included in the receivable balance if it was the correct thing to do is minus the irrecoverable from trade receivables then find the new allowance on the balance, both figures would then be added and included in the income statement for the year.
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4receivable allowance carried forward from last year is $5376.. this years allowance is $173760 x 2%= $3475.2
5376-3475= $1900.8 decrease in allowance, which is a credit in the IS, so the answer is $2040-1900.8= $139.2 (:)
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answer is B
as the bad debt was written off the receivables ledger control account has the correct balance charge 2% on it gives (173760*2%)=3475.2
the opening allowance is 5376 closing we calculated as 3475.2 so the decrese in allowance is credited in income statement and the irrecoverable debt is debited in income statement(I/S). journal entries allowance dr. 3475.2 I/S 3475.2 cr. and irrecoverable debt(I/S) dr.2040, receivalbles ledger control account cr. 2040
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