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please, help me in solving this question. and please explain the answer.
Thanks in advance!
The following control account has been prepared by a trainee accountant:
RECEIVABLES LEDGER CONTROL ACCOUNT
Opening balance 308,600: Cash 147,200
Credit sales 154,200: Discounts allowed 1,400
Cash sales 88,100: Interest charged on overdue accounts 2,400
Contras 4,600: Irrecoverable debts 4,900
_____________: Allowance for receivables 2,800
_____________: Closing balance 396,800
555,500 _____________________555,500What should the closing balance be when all the errors made in preparing the receivables ledger control account have been corrected?
A) $395,200
B) $304,300
C) $309,500
D) $307,100You must have an answer in the same book in which you found the question. You should ask about whatever it is in the answer that you are not clear about – then I will help you.
Cash sales and allowance for receivables so not appear in the control account.
Interest charged on overdue accounts should be debited and not credited.
Contras should be credited and not debited.You should watch my free lectures on control accounts, where all of this is explained. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Thank you!
This question was in ACCA Paper F3 (Practice book)/ Mock exam 1/ question 31.
The answer is 307,100. But I think 304,300.
I need to know that “why we don’t consider allowance for receivables? please explain this.Thank you verw much!
In the year ended 30 September 20X8, Fauntleroy had sales of $7,000,000. Year end
receivables amounted to 5% of annual sales. Fauntleroy wishes to maintain the allowance
for receivables at 4% of receivables and as a result discovers that the allowance is 20%
higher than at the previous year end.
During the year irrecoverable debts amounting to $3,200 were written off and debts
amounting to $450 and previously written off were recovered.
What is the irrecoverable debt expense for the year?
A $5,083
B $5,550
C $5,583
D $16,750
I get 5515 from 3200+2315
Receivables =7000000*0.05=350000
UPdated receivables=350000-3200+450=347250
Povision=347250*0.04=13890
Increase in provision=13890*0.2/1.2=2315
Total irrecoverable debt =2315+3200=5515
your guidance please mr Moffatelshadallahyarov:
The correct answer is 307,100.
An allowance for receivables related to doubtful debts, and they are not removed from receivables in the control account – we are still hoping to get the moment. Instead they appear in a separate account, and on the SOFP we show receivables less the allowance.Again I do suggest that you watch my free lectures – those on irrecoverable and doubtful debts, and those on control accounts – because all of this is explained in the lectures.
fredymaila:
In future, please start a new thread when it is a new question.
The question says that the irrecoverable debts were written off during the year and that the debts were recovered during the year.
Therefore these will have been entered in the t-accounts during the year and so the year end receivables (of 350,000) will already be after having dealt with them – so you don’t adjust for them again.So the provision is 4% x 350,000 = 14,000
So the increase in the provision = 14,000 x 0.2/1.2 = 2,333So the irrecoverable debts expense = 2,333 + 3,200 – 450 = 5,083
My gratitude sir and I will be creating new threads.
Opentuition is really useful as you even get to know about tricky questions instantly.
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