Receivable & Allowance

In the statement of financial position at 31 December 20X5, Yanlin had net receivables of $12,000. During 20X6 Yanlin made sales on credit of $125,000 and received cash from credit customers amounting to $115,500. At 31 December 20X6, Yanlin decided to write off debts of $7,100 and increase the specific allowance for receivables by $950 to $2,100. What was the net receivables figure reported in Yanlin’s statement of financial position at 31 December 20X6?

• 12300
• 13450
• 14400
• 15550

Newell Co’s receivables account shows a balance at the end of the year of $58,200 before making the following adjustments: (i) Newell Co decides to write off debts amounting to $8,900 as it believes they are irrecoverable. (ii) Newell Co also decides to make specific allowance for Carroll’s debt of $1,350, Jay’s debt of $750 and Mai’s debt of $1,416. Newell Co’s allowance for receivables at the previous year end was $5,650. What is the charge to the statement of profit or loss in respect of the above information?

• 6766
• 11034
• 6829
• 10971

In the year ended 30 September 20X8, Gulzar had sales of $7,000,000. The year-end receivables amounted to 5% of annual sales. At the year end, Gulzar’s specific allowance for receivables equated to 4% of receivables. Gulzar also identified that this amount was 20% higher than at the previous year end. During the year irrecoverable debts amounting to $3,200 were written off and debts amounting to $450 and previously written off were recovered. What was Gulzar’s irrecoverable debt expense for the year?

• 5083
• 5550
• 5583
• 16750

The sales revenue of J Co was $2 million and its receivables were 5% of sales. J Co wishes to have a specific allowance for receivables of $4,000, which would make the allowance one third higher than the current allowance. How will the profit for the period be affected by the change in allowance?

• Profit will be reduced by $1,000
• Profit will be increased by $1,000
• Profit will be reduced by $1,333
• Profit will be increased by $1,333

An increase in the allowance for receivables results in which of the following?

• An increase in net current assets
• A decrease in net current assets
• An increase in sales
• A decrease in drawings

Which of the following best explains the purpose of an aged receivables’ analysis?

• To ensure that credit is not extended to unapproved customers
• To ensure that credit customers regularly purchase goods from the business
• To keep track of outstanding debts and identify overdue amounts to follow up
• To keep track of customer addresses

G Co has been notified that a customer has been declared bankrupt. G Co had previously made allowance for this receivable. Which of the following is the correct double entry?

• Dr Allowance for receivables Cr Receivables
• Dr Receivables Cr Irrecoverable debts account
• Dr Irrecoverable debts account Cr Receivables
• Dr Receivables Cr Allowance for receivables

Headington Co is owed $37,500 by its customers at the start, and $39,000 at the end, of its year ended 31 December 20X8. During the period, cash sales of $263,500 and credit sales of $357,500 were made, contras with the payables ledger control account amounted to $15,750 and discounts received $21,400. Irrecoverable debts of $10,500 were written off. Headington Co also identified that the increase in the specific allowance for receivables required at 31 December 20X8 was $8,750. How much cash was received from credit customers during the year ended 31 December 20X8?

• 329750
• 593175
• 593250
• 614650

During its accounting year end to 31 May 20X7, Jupiter Co unexpectedly received a receipt of $382 in relation to a debt which had been written off earlier during the year. What accounting entries should Jupiter Co make to update the general ledger to reflect this situation?

• Dr Bank $382 Cr Sundry income $382
• Dr Bank $382 Cr Receivables $382
• Dr Bank $382 Cr Allowance for receivables $382
• Dr Bank $382 Cr Irrecoverable debts $382

What is the purpose of customer credit limits?

• To enable the entity to make a decision regarding whether trade or early settlement discounts should be offered to individual customers
• To manage the risk of cash customers not being able to pay for goods sold
• To manage the risk of loss to the business arising from credit customers not being able to pay for goods sold
• To manage the risk of having inventory shortages