ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $180,000. A specific allowance of $1,600 had been made for a business customer, Drab. The general allowance for receivables was 5%. During the year, Drab went out of business owing Tartar Co $2,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $200,000. There were no specific allowances but the general allowance for receivables was increased to 6%.
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 | 2,000 |
| 6% New Allowance | 12,000 |
| Less opening balance allowance for receivables | (10,520) |
| Irrecoverable expenses in Income statement | 3,480 |
6 % New Allowance
=6 % X 200,000
= $ 12,000
Opening balance allowance for receivables
= Specific allowance $1,600 + 5% (Opening Receivables $ 180,000 -Specific allowance $1,600 )
=$1,600 + $8,920
= $ 10,520
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