ACCA F3 IRRECOVERABLE EXPENSE 5

At 1 January 2014, Tartar Co had total receivables of $270,000. A specific allowance of $7,200 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 $9,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $300,000. 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?

SUGGESTED SOLUTIONS

$
Write Off 9,000
4% New Allowance 12,000
Less opening balance allowance for receivables (15,084)
Irrecoverable expenses in Income statement 5,916

4 % New Allowance

=4 % X 300,000

= $ 12,000

Opening balance allowance for receivables

= Specific allowance $7,200 + 3% (Opening Receivables $ 270,000 -Specific allowance $7,200 )

=$7,200 + $7,884

= $ 15,084

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