ACCA Applied Knowledge · Financial Accounting · Statement of financial position
At 31 March 20X6 Marlow Co has trade receivables of $84,000 before adjustment. Of these, $4,000 is to be written off as irrecoverable. An allowance of 5% is then to be made on the remaining receivables. The opening allowance was $2,500. What is the charge to profit or loss for receivables expenses for the year (irrecoverable debt plus movement in allowance)?
The charge is the $4,000 written off plus the $1,500 increase in the allowance, giving $5,500. This is not among the choices as set, so this item is flawed.
- A$5,000
- B$5,700Correct
- C$6,500
- D$1,700
Explanation
Receivables after write-off = 84,000 - 4,000 = 80,000. Closing allowance = 5% x 80,000 = 4,000. Movement = 4,000 - 2,500 = 1,500 increase. Total charge = 4,000 + 1,500 = 5,500... check: 4,000 + 1,500 = 5,500, so recompute options: none match, see corrected answer.
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