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Trade Receivable & Liquidation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Trade Receivable & Liquidation

  • This topic has 2 replies, 2 voices, and was last updated 13 years ago by MikeLittle.
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  • Author
    Posts
  • May 1, 2012 at 11:25 am #52436
    mariesopp
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    I have an adjustment that I am really struggling with as follows:

    Uzielli recognised a trade receivable on 1 November 20X6 due from its customer Thompson at $51,542,000 payable in three annual instalments of $20,000,000 commencing 31 October 20X7 discounted at a market rate of interest adjusted to reflect the risks to Thompson of 8%.
    During November 20X8 (before Uzielli’s financial statements were authorised for issue),Thompson entered into liquidation and the liquidator notified Uzielli the creditors would receive 80% of amounts owed on original payment dates. An appropriate market rate of interest (adjusted as above) was 9% at the year end.

    Would appreciate any help as I am really stuck.

    Thanks

    Marie

    May 2, 2012 at 4:32 pm #96968
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    If I’m correct, I believe that Uzielli should write down the debt to 14,678,900.

    That’s calculated as 20,000,000 ( the last of the three instalments ) discounted at 9% to give 18,348,624.

    Multiply by 80% as the amount thought to be recoverable gives us 14,678,900. At the year end, it would be included in the draft financial statements at 20,000,000 discounted for 1 year at 8% = 18,518,518

    This therefore needs a write-down of 3,939,618 as a result of a subsequent event which has fixed with greater certainty an amount or estimate within the financial statements ie the fair value of the recoverability of an account receivable.

    But I may be wrong!

    May 2, 2012 at 4:42 pm #96969
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    sorry, 3,839,618

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