Question 1: On 1 January 20X4 a company received news that a major customer had been declared bankrupt and that its debt of 42,000 is irrecoverable. The bookkeeper has incorrectly recorded the irrecoverable debts expense as 24,000 and credited trade receivables with the same amount. What journal entry is required to correct the error?

A) Dr Allowance for receivables; Cr Trade receivables

B) Dr Irrecoverable debts expense; Cr Trade receivables

C) Dr Irrecoverable debts expense; Cr Allowance for receivables

D) Dr Allowance for receivables; Cr Irrecoverable debts expense

Question 2: A business accounts for the expense of irrecoverable debts in administrative expenses. It has reduced its allowance for receivables by 200. What is the effect on gross profit?

A) Reduce by 200

B) Increase by 200

C) No effect

D) Increase by 400

Question 3: The trial balance of Kanine Bros as at 31 May 20X7 includes the following: Debit Credit Trade receivables 60,500 Allowance for receivables at 1 June 20X6 1,420 Subsequently a review of the receivables ledger reveals the following: Debts totaling 2,100 are considered irrecoverable and are to be written off. The business wishes to reduce the allowance for receivables to 800. What is the irrecoverable debt charge or credit to be included in the statement of profit or loss for the year ended 31 May 20X7?

A) 1,480 charge

B) 120 credit

C) 1,480 credit

D) 120 charge

Question 4: At 30 September 20X7 a company has receivables totalling 128,000 and an allowance for receivables of 4,800 brought forward from the previous year. It has been decided to write off receivables totalling 10,500 and to adjust the allowance for receivables to 3,000. What will be the net trade receivables balance in the statement of financial position for the year ended 30 September 20X7?

A) 114,500

B) 120,500

C) 135,500

D) 141,500

Question 5: Gem received a bank transfer for 25 on 30 June 20X2 from a credit customer in settlement of an outstanding debt of 100, along with notification that the remainder of the debt will never be paid. What is the double entry to be recorded on 30 June 20X2?

A) Dr Cash at bank 25; Dr Irrecoverable debts expense 75; Cr Trade receivables 100

B) Dr Cash at bank 25; Dr Irrecoverable debts expense 75; Cr Allowance for receivables 100

C) Dr Cash at bank 25; Dr Allowance for receivables 75; Cr Irrecoverable debts expense 100

D) Dr Cash at bank 25; Dr Allowance for receivables 75;Cr Trade receivables 100