ACCA F3 IRRECOVERABLE EXPENSE 5
At 1 January 2014, Tartar Co had total receivables of $270,000. A specific allowance of $3,200 had been made for a business customer, Drab. The general allowance for receivables was 3%. During the year, Drab went out of business owing Tartar Co $4,000, none of which is expected to be recovered. At 31 December 2014, Tartar had total reveivables of $300,000. There were no specific allowances but the general allowance for receivables was increased to 4%.
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 | 4,000 |
| 4% New Allowance | 12,000 |
| Less opening balance allowance for receivables | (11,204) |
| Irrecoverable expenses in Income statement | 4,796 |
4 % New Allowance
=4 % X 300,000
= $ 12,000
Opening balance allowance for receivables
= Specific allowance $3,200 + 3% (Opening Receivables $ 270,000 -Specific allowance $3,200 )
=$3,200 + $8,004
= $ 11,204
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