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Question:
Haven Bay Co has a balance per trade receivables at its financial year end accounting to $46,000.
There was a general allowance brought forward from the previous financial year amounting to $1,080. The directors would like to maintain a 2% general allowance carried forward.
Required:
Calculate the balance per the irrecoverable debts expense account in the statement of profit or loss.
Answer:
$120 credit.
How do you work this out please?
Can someone please assist me with this.
Thank you.
Jegan
You really need to watch my free lectures on this!!!
Either you have not typed out the whole question, or the answer is wrong – it is not 120 credit, but 160 credit.
The allowance required at the end of the year is 2% x 46,000 = 920.
Since the allowance brought forward is 1,080, it needs reducing by 1080 – 920 = 160.
Therefore debit the allowance and credit irrecoverable debts expense with 160.
Again, you should watch the lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Apologies, Sir John.
The Answer of $120 Credit was given in the LSBF Answerbook.
I got $160 Credit as my answer.
I was just a bit confused with the answer given in the LSBF Answerbook.
I can’t stand it when the Answers in the Answerbook are incorrect!
Well I guess mistakes happen.
Thank you for confirming my answer Sir and showing the working out.
Much appreciated!
Kind Regards
Jegan
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