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Clinton had receivables of $598,600 at 30 November 2008. His allowance for
receivables at 1 December 2007 was $12,460 and he wishes to change that to
2% of receivables at 30 November 2008. On 29 November 2008 he received
$635 in full settlement of a debt that he had written off in the year ended 30
November 2007.
What total amount should be recognised for receivables in the income
statement for the year ended 30 November 2008?
A $488 credit
B $11,972 debit
C $1,123 credit
D $147 debitanswer is C
first step-allowance for receivable 12460 bal b/d-1 dec 2007
2nd step determine allowance for receivable nov-2008-598600*2%=11972
reduce in allowance=DR allowance for receivable CR income statement
12460-11972=488 CR
bad debt recovered DR cash cr bad debt recovered-635 CR
488+635=1123 CR
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