At 30 June 20X6 a company’s allowance for receivables was $9,750. At 30 June 20X7 trade receivables totaled $129,250. It was decided to write off debts totaling $9,250. The allowance for receivables was to be adjusted to the equivalent of 7 per cent of the trade receivables.
What figure should appear in the statement of profit or loss for these items?
Answer
| $ | |
| Allowance for receivables ((129,250 – 9,250) x 7%) | 8,400 |
| Previous allowance | (9,750) |
| Reduction | (1,350) |
| Debts written off | 9,250 |
| Charge to statement of profit or loss | 7,900 |