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- This topic has 3 replies, 3 voices, and was last updated 4 years ago by John Moffat.
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- November 30, 2017 at 4:21 am #419068
11.2 At 31 December 20X2 a company’s receivables totalled $400,000 and an allowance for receivables of
$50,000 had been brought forward from the year ended 31 December 20X1.
It was decided to write off debts totalling $38,000. The allowance for receivables was to be adjusted to
the equivalent of 10% of the receivables.
What charge for receivables expense should appear in the company’s statement of profit or loss for the
year ended 31 December 20X2?
A $74,200
B $51,800
C $28,000
D $24,200answer is A. $50,000 was ignored because its a brought forward amount, meaning it was already deducted from the receivables amount?
November 30, 2017 at 4:55 am #419080The answer is not A at all – it is D (and D is the answer that is in the BPP Revision Kit for question 11.2 – why do you write that the answer is A ? !!!).
The irrecoverable and doubtful debts expense for the year is 24,200.
(The cost of writing off the irrecoverable debts of 38,000, less the reduction in the allowance of 13,800 (50,000 – 10% x (400,000 – 38,000))
April 16, 2020 at 7:40 am #568415Dear sir, if those debts 38,000 written off were previously made allowances for, so it should not be included in the soPL for the year????
April 16, 2020 at 8:01 am #568421No. It makes no difference whether the debts written off had been previously allowed for (because the change in the allowance would be different by the same amount).
Have you watched my free lectures on irrecoverable and doubtful debts?
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