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Headington Co is owed $ 37,500 by its customers at the start, and $ 39,000 at the end, of its year ended 31 Dec 20X8
During the period, cash sales of $ 263,500 and credit sales of $ 357,500 were made, discounts allowed amounted to $ 15750 and discounts received $ 21,400.
Irrecoverable debts of $10,500 were written off.
Headington Co also identified that the increase in the specif allowance for receivables required ar 31 Dec 20X8 was $8,750.How much was received from credit customers during the year ended 31 Dec 20X8 ?
The answer should be 329,750 as following :
39,000 – 37,500 = 1,500
15,750 + 10,500 = 26,250
26,250 + 1,500 = 27,750
357,500 – 27,750 = 329,750
Sir, Is that correct ?
Thanks
the sales revenue of J co was $ 2 million and its receivables were 5% of sales. J Co wishes to have a specific allowance for receivables of $4000 which would make the allowance 1/3 higher than the current assets.
The correct answer is 4000 x 3/4 = 3000
4000 -3000 = 1000 ( profit reduced )
Why did they multiplied by 3/4 rather than by 1/3 ?
Thanks
First question:
Your answer is correct.
(But I don’t understand why you are attempting questions for which you do not have an answer 🙂 You should be using a Revision Kit from one of the ACCA approved publishers. They contain exam standard questions together with answers and explanations.)The question should have said “which would make the alliance 1/3 higher than the current allowance” !
Suppose the current allowance was 3. Then the new allowance would be 3 + 1/3 x 3 = 4.
So if the new allowance was 4, then the old allowance would have been 3.Here, the new allowance is 4,000 and so the old allowance must have been 3/4 x 4,000 = 3,000. (and it checks: 4,000 = 3,000 + 1/3 x 3,000)
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