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Hello Mr Moffat 🙂
This is a problem from Kaplan’s F3 Exam kit (p.54, question 197):
Receivables at 31 Dec are $29,600 (Dr). Irrecoverable debts are 1,600 (Dr). Additional irrecoverable debts of $3,000 were discovered at the year end. Closing allowance for receivables is $2,660.
We are supposed to calculate the closing net receivables.My question is: why does the solution calculate the net receivables as 29,600 – 3,000 – 2,660 = 23,940? How come the $1,600 of the previously determined irrecoverable debts aren’t included in the calculation?
Thank you!
If there is a debit balance of 1600 on the irrecoverable debts expense account, then it means that they had already been written off and therefore already removed from the receivables balance.
We don’t want to remove them a second time 🙂
To check if I have understood – one should ignore the balance on the irrecoverable debts expense account and only take in account the amount of irrecoverable debt that has been ascertained at year end?
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