ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $405,000. A specific allowance of $2,400 had been made for a business customer, Drab. The general allowance for receivables was 9%. 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 $450,000. There were no specific allowances but the general allowance for receivables was increased to 10%.
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 |
| 10% New Allowance | 45,000 |
| Less opening balance allowance for receivables | (38,634) |
| Irrecoverable expenses in Income statement | 9,366 |
10 % New Allowance
=10 % X 450,000
= $ 45,000
Opening balance allowance for receivables
= Specific allowance $2,400 + 9% (Opening Receivables $ 405,000 -Specific allowance $2,400 )
=$2,400 + $36,234
= $ 38,634
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