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Please help me!!!
At 1 January 20X5 a company had an allowance for receivables of $18,000
At 31 December 20X5 the company’s trade receivables were $458,000.
It was decided:
? To write off debts totalling $28,000 as irrecoverable.
? To adjust the allowance for receivables to the equivalent of 5% of the remaining
receivables.
What figure should appear in the company’s statement of profit or loss for the total of
debts written off as irrecoverable and the movement in the allowance for receivables
for the year ended 31 December 20X5?
A. $49,500
B. $31,500
C. $32,900
D. $50,900Please do not simply set test questions and expect an answer. You must have an answer in the same book in which you found the question, so you should ask about whatever it is in the answer that you are not clear about – then I will explain.
There is an irrecoverable debt of $28,000.
The new allowance required is 5% x (458,000 – 28,000) = $21,500.
Therefore the increase needed is 21,500 – 18,000 = $3,500.So the total expense is 28,000 + 3,500 = $31,500.
Have you watched my free lectures on irrecoverable and doubtful debts? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thanks for your help. I’ve understand more.
Actually, I found this question in a test on Internet, so I did not have an answer in any book.
Your explanation is simple and understandable. I will watch your lectures.
Thank you!
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