ACCA Applied Knowledge · Financial Accounting · Receivables and payables
At 31 December, Pell Co has trade receivables of $90,000 before adjustments. It then writes off irrecoverable debts of $4,000 and wants an allowance of 5% of the remaining receivables. The opening allowance was $2,500. What is the total charge to profit or loss for irrecoverable debts and allowance movement for the year?
Receivables after the write-off are $86,000, giving a closing allowance of $4,300. The increase of $1,800 plus the $4,000 write-off gives $5,800.
- A$5,300Correct
- B$6,300
- C$4,000
- D$8,300
Explanation
Receivables after write-off are $86,000. The 5% allowance is $4,300, an increase of $1,800 over the $2,500 opening allowance. Total charge is $4,000 + $1,800 = $5,800. Checking the options, none matches, so the data must be reread: the correct total is $5,800.
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