ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $315,000. A specific allowance of $5,600 had been made for a business customer, Drab. The general allowance for receivables was 4%. During the year, Drab went out of business owing Tartar Co $7,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $350,000. There were no specific allowances but the general allowance for receivables was increased to 5%.
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 | 7,000 |
| 5% New Allowance | 17,500 |
| Less opening balance allowance for receivables | (17,976) |
| Irrecoverable expenses in Income statement | 6,524 |
5 % New Allowance
=5 % X 350,000
= $ 17,500
Opening balance allowance for receivables
= Specific allowance $5,600 + 4% (Opening Receivables $ 315,000 -Specific allowance $5,600 )
=$5,600 + $12,376
= $ 17,976
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