ACCA Knowledge Level Receivables and Bad Debts — practice questions

1. Net realisable value = Receivables - Allowance for receivables. 2. $$\$97{,}000 - \$12{,}000 = \$85{,}000$$ 3. $109,000 adds the allowance instead of subtracting it. 4. $97,000 ignores the allowance; $12,000 is only the allowance. Both are wrong. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.4.2 "Allowance Method", p.141_

1. Percent of sales bases the entry on sales, not on a target balance. 2. Estimate = $$\$400{,}000 \times 2\% = \$8{,}000$$ 3. The full $8,000 is recorded and simply added to any existing balance, so the entry is $8,000. 4. $7,400 and $8,600 net against the balance, which is the analysis-of-receivables logic, not this method. 5. $600 is only the carryover balance, not the entry. All distractors are wrong. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.4 "Allowance Method - Percent of Sales", p.144_