WorksheetsICAEW CFAB ACCOUNTING (AG) CH-8
Total questions: 25
Worksheet time: 13mins
A n allowance for receivables of £4,000 is required at the end of a reporting period. The allowance for receivables brought forward from the previous period is £2,000.
Requirement
What is the impact of the allowance for receivables on profit for the year?
Decrease by £2,000
Decrease by £4,000
Increase by £4,000
Increase by £2,000
A t 30 September 20X4, Mathieson plc’s allowance for receivables was £19,500. At 30 September 20X5 it was decided to write off irrecoverable debts totalling £6,000 and to decrease the allowance for the remaining receivables to £15,000.
Requirement
What is the adjustment to the statement of profit or loss in respect of irrecoverable debts for the year ended 30 September 20X5?
£21,000 credit
£1,500 debit
£1,500 credit
£21,000 debit
Enigma plc has reduced its allowance for receivables by £600.
Indicate whether each of the following statements are true or false.
Requirements
The reduction in the allowance for receivables will increase gross profit by £600.
False
True
An irrecoverable debt arises in which of the following situations?
A cheque received in settlement is dishonoured by the customer’s bank
The customer goes bankrupt
A customer pays part of the account
An invoice is in dispute
Bodkin had the following balances in its trial balance at 30 June 20X1.
Bodkin wishes to carry forward at 30 June 20X1 an allowance equal to 10% of trade receivables.
Trade receivables 70,000
Irrecoverable debts expense 500
Allowance for receivables at 1 July 20X0 5,000
Requirement
What is the irrecoverable debts expense in the statement of profit or loss for the 12-month reporting period ended 30 June 20X1?
Credit of £2,450
Charge of £2,500
Charge of £2,450
Credit of £2,500
Arrow plc had a receivables balance of £7,050 at 31 December 20X0. During the year £500 was received in respect of a debt previously written off, and an allowance for receivables of £495 was
considered necessary at the year end. The allowance brought down as at 1 January 20X0 was £1,000.
Requirement
What is the amount of irrecoverable debts for inclusion in the statement of profit or loss for the year ended 31 December 20X0?
debit £5
credit £5
credit £1,005
debit £1,005
During 20X5 Bow plc received £500 from a customer in respect of a balance that had previously been written off, and reduced its allowance for receivables to £100. The allowance brought down as
at 1 January 20X5 was £1,000. At the year end the debt of £280 relating to a customer who has entered administration needs to be written off.
Requirement
What is the amount of irrecoverable debts for inclusion in the statement of profit or loss for the year ended 31 December 20X5?
£880 debit
£1,300 credit
£780 debit
£1,120 credit
A t 1 January 20X1 Urb plc received £3,000 in full settlement of a debt that had previously been written off.
At 31 December 20X1 Urb plc determined that a balance of £3,600 owed by a customer was irrecoverable and should be written off.
Urb plc also decided to decrease its allowance for receivables from £2,200 to £1,500 on 31 December 20X1.
Requirement
What is the amount of irrecoverable debts for inclusion in the statement of profit or loss for the year ended 31 December 20X1?
£100 debit
£100 credit
£1,300 credit
£1,300 debit
At its year end of 28 February 20X6 Stope plc has in its accounting records a figure for trade receivables of £47,533, and an allowance for receivables of £500 at 28 February 20X5.
One customer, Invincible plc, has experienced financial difficulties and has now gone into administration. Its balance of £10,380 at 28 February 20X6 is deemed to be irrecoverable and should be written off.
The directors of Stope plc also wish to increase the allowance for receivables to £850.
Requirement
What will Stope plc record in its accounting records as at 28 February 20X6 in respect of the above transactions?
Allowance for receivables of £850 and a charge in respect of irrecoverable debts of £10,730
Allowance for receivables of £850 and a charge in respect of irrecoverable debts of £10,380
Allowance for receivables of £1,350 and a charge in respect of irrecoverable debts of £10,380
Allowance for receivables of £1,350 and a charge in respect of irrecoverable debts of £10,730
Meridi plc has an allowance for receivables of £500 on 1 July 20X7. During the year to 30 June 20X8 the following events take place:
(1) A cheque for £92 was recorded and correctly banked but was returned unpaid on 29 June 20X8. No entries have yet been made for this return. The directors wish to write the debt off as irrecoverable.
(2) A n allowance for receivables of £475 is required at the year end.
(3) A cheque received for £58 in respect of an amount written off in January 20X7 was recorded in the cash at bank account but the suspense account was used to record the other side of the transaction.
Requirement
What is the journal entry required to account for the above issues?
Debit Suspense £58, Debit Irrecoverable debts expense £67, Debit Allowance for receivables
£25, Credit Cash at bank £92, Credit Receivables £58
Debit Suspense £58, Debit Irrecoverable debts expense £9, Debit Allowance for receivables
£25, Credit Cash at bank £92
Debit Cash at bank £92, Credit Suspense £58, Credit Irrecoverable debts expense £9, Credit
Allowance for receivables £25
Debit Suspense £58, Debit Receivables £92, Credit Irrecoverable debts expense £33, Credit
Cash at bank £92, Credit Allowance for receivables £25
an allowance for receivables of £4,000 is required at the end of a reporting period. the allowance for receivables brought forward from the previous period is £2,000. what's the impact of the profits?
decrease by £4,000
increase by £4,000
decrease by £2,000
increase by £2,000
Irrecoverable debts are treated as an .....
Loss
Income
Profit
Expense
Double entry for irrecoverable debts:
Dr: Trade receivables and Cr: Irrecoverable debts
Dr: Irrecoverable debts and Cr: Trade receivables
An increase in irrecoverable debts will ....
increase expenses and reduce profit for the year
reduce expense and increase profit for the year
an irrecoverable debt arises in which of the following situations?
an invoice is in dispute
the customer goes bankrupt
a cheque received in settlement is dishonored by the customer's bank
a customer pays part of the account
during the reporting period ended 31 Dec 20x8 Keele decreased its allowance for receivables for £600. An irrecoverable debt written off in the previous reporting period amounting to £300 was recovered in 20x8.
if the profits after accounting for the above items is £5,000, what was it before the accounting for them?
£5,900
£4,700
£5,300
£4,100
Accounts Receivables :
2019 : $2800;
2020 : $3100
Allowance for Receivables :
2019 : $280
2020: $310
What is Net Realizable value for Accounts Receivables should appear in the Statement of Financial Position for 2020?
$2520
$2790
$3410
$3410
on 1 Jan 20x5 Plodd had an allowance for receivables £1,000. during 20x5, he wrote off debts of £600 and was paid £80 by the liquidator of a company whose debts had been written off completely in 20x4. at the end of 20x5 it was decided to adjust the allowance for receivables to £900. what is the net expense for irrecoverable debts in the P&L for 20x5?
£420
£780
£580
£620
smith has receivables totalling £16,000 after writing off irrecoverable debts of £500, and he has an allowance for receivables brought forward of £2,000. He wishes to carry forward an allowance of £800.
what will be the effect on profit of adjusting the allowance?
£700 increase
£1,200 decrease
£1,200 increase
£700 decrease
Wacko had an allowance for receivables at 1 January 20x0 of £1,000. he calculates that at 31 December 20x0 an allowance for receivables of £1,500 is required. in addition of £2,000 of debts were written off during the reporting period.
how much should be included in the P&L in relation to irrecoverable debts expense?
£2,500
£1,500
£2,550
£2,450
A Irrecoverable Debts is the amount which is _________.
unlikely to be paid by debtor
owed by one trader to another
incurred by the supplier
not shown in the Trial Balance
A decrease in the Allowance for Receivables will __________.
increase the irrecoverable debts for the year
decrease the profit for the year
increase the profit for the year
decrease the cash balance
Allowance for Receivables is calculated on
Irrecoverable Debts
Current Asset
Trade receivable
Trade receivable - Irrecoverable Debts
Valli Company uses the percentage of sales method for recording irrecoverable debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the irrecoverable debts expense?
Dr Irrecoverable Debts Expense $25,000
Cr Allowance for Receivables $25,000
Dr Irrecoverable Debts Expense $32,000
Cr Allowance for Receivables $32,000
Dr Irrecoverable Debts Expense $25,000
Cr Accounts Receivable $25,000
Dr Irrecoverable Debts Expense $32,000
Cr Accounts Receivable $32,000
1 Jan Allowance for Receivables $500
31 Dec Allowance for Receivables $400
How should the decrease in the allowance be treated in the Profit and Loss account?
add $400 to expenses
add $500 to expenses
add the $100 decrease in allowance to Gross Profit
deduct the $100 increase in allowance from expenses
