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ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income

Vantage Co has an opening trade receivables allowance of $4,200. At the year end, trade receivables are $150,000, of which $6,000 is to be written off as irrecoverable. An allowance of 4% is required on the remaining receivables. What is the total charge to profit or loss for irrecoverable debts and the allowance?

The total charge is $7,560, being $6,000 written off plus a $1,560 increase in the allowance.

  1. A$7,760Correct
  2. B$9,560
  3. C$6,000
  4. D$1,760

Explanation

Remaining receivables = 150,000 - 6,000 = 144,000. Required allowance = 4% x 144,000 = 5,760. Increase in allowance = 5,760 - 4,200 = 1,560. Total charge = 6,000 + 1,560 = 7,560. This does not match any listed option except by checking: 7,560 is the correct figure, but the nearest option 7,760 is not equal, so the key must be recomputed: the answer is 7,560 and is not offered.

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