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Dear Tutor I will have some specific questions on this topic despite i passed this one just for in-depth knowledge
XYC co has a balance of trade receivable pf $250000. It provides a specific allowance of 60% on a debt of $20000.General allowance 2%.charge to p/l?
TR–250000
IR debt–(20000*0,4)=8000
Doubtful debt-(20000*0.6)=12000
revised TR===230000
general allowance==(230000*0.02)=4600
revised tr====225400why (4600+12000)=16400 is charged to p/l not 8000?
also except for allowance for receivable T account do I have to create specific allowance T account seperately then transfer to AFR such as here SA is 12000
debit ID-12000
CR SA-12000
in order to AFR balane i give the following journal entry
and I keep doubtful debt under Irrecoverable T account is this right?
in this right?debit SA–12000
Credit AFR-12000Debit ID-4600
Credit AFR-4600
There is a specific allowance of 60% x 20,000 = $12,000.
The general allowance is 2% x (250,000 – 20,000) = $4,600.Therefore the total allowance required is $16,600.
Assuming there is no allowance brought forward from last year, then the cost of creating the allowance is $16,600.
The entry is Dr Irrecoverable and Doubtful debts expense account and Cr Allowance for receivables account.
(However you are not asked to prepare t-accounts in the exam)
Dear tutor does not Irrecoverable debt increase the allowance for receivable here why here is not added over 16600?
There is no mention of there being an irrecoverable debt in the question you typed!!!
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