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16. Clinton had receivables of $598,600 at 30 November 2008. His allowance for receivables at 1 December 2007 was $12,460 and he wishes to change that to 2% of receivables at 30 November 2008. On 29 November 2008 he received $635 in full settlement of a debt that he had written off in the year ended 30 November 2007.
What total amount should be recognized for receivables in the income statement for the year ended 30 November 2008?
a.) $488 credit
b.) $11,972 debit
c.) $1,123 credit
d.) $147 debitI think there might be an error in the question. If you need to show receivables a/c, it appears in the Balance Sheet (amount should be $598,600).
If you need to charge the Income Statement, it should be:
Cr Income Statement $1,123Workings:
Allowance for receivables:
balance at 1 December 2007: $12,460
balance at 30 November 2008: $11,972 (598,600*2%)
Movement in allowance for receivables: $488
Dr Allowance $488
Cr Irrecoverable debts expense $488Irrecoverables debts expense:
Double entries for irrecoverable debts recovered will be:
Dr Cash $635
Cr Irrecoverable debts expense $635There is Credit on the Irrecoverable debts expense totalling $1,123.
Next step:
Dr Irrecoverable debts expense $1,123
Cr Income statement $1,123Answer c.
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