ACCA FA · Chapter 7 · Question 7 of 12
At its year end, a business has receivables of $84,000 before adjusting for an irrecoverable debt of $3,000, which is to be written off. An allowance for receivables of 5% of the remaining receivables is required. The allowance brought forward is $3,600. What is the total irrecoverable debts expense for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $3,450
Explanation
Receivables after write-off = $84,000 - $3,000 = $81,000. Required allowance = 5% x $81,000 = $4,050, an increase of $4,050 - $3,600 = $450. Total expense = write-off $3,000 + increase in allowance $450 = $3,450. Calculating the allowance before the write-off gives $4,200, an increase of $600 and a total of $3,600.
More Accruals, prepayments and receivables MCQs
- Q9At the year end, a company's receivables are $146,000. This includes a debt of $6,000 to be written off. A specific allowance of 50% is…
- Q10How is an accrued expense presented in the statement of financial position?
- Q11A business pays its staff every Friday for the five-day week ending on that day. The weekly wages bill is $3,500. The year end falls on a…
- Q12How is the allowance for receivables presented in the statement of financial position?
- Q1A business with a 31 December year end rents a warehouse. The annual rent was $24,000 until 30 April 20X5, and increased to $30,000 per…