ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $360,000. A specific allowance of $2,400 had been made for a business customer, Drab. The general allowance for receivables was 6%. During the year, Drab went out of business owing Tartar Co $3,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $400,000. There were no specific allowances but the general allowance for receivables was increased to 7%.
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 | 3,000 |
| 7% New Allowance | 28,000 |
| Less opening balance allowance for receivables | (23,856) |
| Irrecoverable expenses in Income statement | 7,144 |
7 % New Allowance
=7 % X 400,000
= $ 28,000
Opening balance allowance for receivables
= Specific allowance $2,400 + 6% (Opening Receivables $ 360,000 -Specific allowance $2,400 )
=$2,400 + $21,456
= $ 23,856
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