- 1 Marks
Question
What is the amount of allowance recognized in the statement of profit or loss?
The following is an information extract from the books of accounts of Walling Parking Enterprises, a sole trader:
- Trade receivables balance for the period: N1,300,000
- The chance of collecting 2% of the receivables figure is remote.
- It is virtually certain that 95% of the balance of the receivables is collectable.
Answer
Answer: D. N89,700
Explanation: The total allowance for receivables includes:
- 2% irrecoverable debts: 2% of N1,300,000 = N26,000
- 5% doubtful debts: 5% of the remaining N1,274,000 (N1,300,000 – N26,000) = N63,700
The total allowance recognized in the profit or loss statement is N89,700 (N26,000 + N63,700).
- Tags: Allowances, Bad Debts, Financial Statements, Receivables
- Level: Level 1
- Topic: Bad and Doubtful Debts
- Series: NOV 2019
- Uploader: Dotse