ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $405,000. A specific allowance of $6,400 had been made for a business customer, Drab. The general allowance for receivables was 3%. During the year, Drab went out of business owing Tartar Co $8,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $450,000. There were no specific allowances but the general allowance for receivables was increased to 4%.
What is the charge in the statement of profit or loss for the year to 31 December for the allowance for receivables and irrecoverable debts?
| $ | |
| Write Off | 8,000 |
| 4% New Allowance | 18,000 |
| Less opening balance allowance for receivables | (18,358) |
| Irrecoverable expenses in Income statement | 7,642 |
4 % New Allowance
=4 % X 450,000
= $ 18,000
Opening balance allowance for receivables
= Specific allowance $6,400 + 3% (Opening Receivables $ 405,000 -Specific allowance $6,400 )
=$6,400 + $11,958
= $ 18,358
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