ACCA FA · Chapter 7 · Question 9 of 12
At 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 required against another debt of $2,400, and a general allowance of 2% is required against the remaining receivables. The allowance for receivables brought forward is $5,200. What is the net irrecoverable debts expense for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $4,752
Explanation
Receivables after write-off = $146,000 - $6,000 = $140,000. Specific allowance = $2,400 x 50% = $1,200. General allowance = 2% x ($140,000 - $2,400) = $2,752. Total allowance = $3,952, a decrease of $5,200 - $3,952 = $1,248. Expense = $6,000 - $1,248 = $4,752. Not excluding the specifically provided debt from the general allowance gives $4,800.
More Accruals, prepayments and receivables MCQs
- 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…
- Q2At 1 January 20X5 a business had an accrual for electricity of $1,400. During 20X5 it paid electricity bills totalling $8,600. In February…
- Q3A business failed to record a prepayment of $2,000 at the year end. What is the effect of this error?