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my Dear tutor, i have a question
At 1 January 20×1,there was an allowance for receivables of $3000.During the year ,$ 1000 of debts were written off as irrecoverable, and $ 800 of debts previously written off were recovered.At 31 December 20X1, it was decided to adjust the allowance for receivables to 5% of receivables which are $20000.
What is the total receivables for the year?
opening allowance 3000
bad debt 1000 recovered 800 and now became 200
closing allowance 20000*5%=1000-coming this question why i can not deduct the remaining 200 from 20000 by multiplying 5 %?because usually we deduct irrecoverable debt from receivables and find allowance by multiplying given percentage figure?
This part is seemed to be unclear for me
I would rather doing it in that way.
20000-200*5%=990closing allowanceNeed explanation
Another question
t 1 January 20X4, Tartar Co has a total receivable of $380,000. A specific allowance of $20,000 had been made for a business customer, Drab. The general allowance for receivable was 2.5%. During the year, Drab went out of business owing Tartar Co $ 28, 000, none of which is expected to be recovered. At 31 December 20X4, Tatar has total receivable of $420,000. There was no specific allowance but the general allowance for receivable was increased to 3%.
A $ 16,400
B $ 31,600
C $ 44,400
D $ 11,600opening allowance
380000-20000*2.5=9000+20000=29000closing allowance
420000*3=12600reduction 16400-28000=11600
why we do not deduct 28000 from 420000 in order to find closing allowance ?it says during the year so it should be deducted from 420000?
these two question is almost the same question in the point that i can not cahtch it
First question:
The question says that the irrecoverable debts were written off during the year. So the receivables figure given at the end of the year is already after removing the irrecoverable.
Second question.
If you are sure that you have copied the question correctly, then it seems the answer is wrong.
This time although they say that Drab went out of business, they do not say that the debt has actually been removed, and so they should have removed it before calculating the allowance.
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