Question
Trade receivables You are setting up annual accounts for the company DEF ehf. for the financial year ended 31 December 2020. In last year's annual
Trade receivables
You are setting up annual accounts for the company DEF ehf. for the financial year ended 31 December 2020. In last year's annual accounts, ie. financial year 2019, trade receivables totaled ISK 633,697,712. and the table below for the age analysis of trade receivables is taken from the notes that accompanied the annual accounts for the financial year ended 31 December 2019.
The following information is available on the company's operations in the year 2020: The company's total sales were ISK 4,727,485,925. and was mostly in account transactions. Sales in cash amounted to a total of ISK 354,561,444. The company received a total of ISK 4,243,256,296 from customers. The expense in the income statement due to verifiably lost trade receivables in the year 2020 was ISK 7,575,500. during the year. The key "Accounts receivable" in the balance sheet was offset.
The following information is available on the age analysis of trade receivables at the end of 2020: The maturity, within 30 days ISK 81,113,130, 31 - 60 days ISK 40,540,710, 61 - 90 days ISK 20,213,130. and older than 91 days ISK 6,825,210.
During the settlement of the year 2020, which was in March 2021, it was revealed that two of the company's customers had been declared bankrupt, Customer A went bankrupt in December 2020 and owes ISK 6,525,325. and customer B went bankrupt in February 2021 and owes ISK 8,838,582. No amount was charged in 2020 due to these two bankruptcies and the claims were not due at the end of the year.
The following needs to be resolved;
a. Set up a table for explanations in the 2020 annual accounts that shows the age analysis of trade receivables at the end of 2020. Use the same proportional write-down in 2019, except that the "Non-Expense" must be increased from 1.50% to 1.75%. b. Show what entries need to be made in the company's accounting in the year 2020. Make sure to show the correct date, the names of the relevant accounting keys and all figures in whole ISK. Entries can be displayed as T-accounts if you prefer. c. What is the total charge for the year 2020 in the income statement due to trade receivables and what is the amount of trade receivables in the balance sheet.
| Nominal value | Proportional | Write-down | ||||||
| Age analysis of trade receivables 31.12.2019 | trade receivables | write-down | in ISK | |||||
| The charge | 513.537.000 | 1,50% | 7.703.055 | |||||
| Due date: within 30 days | 77.250.600 | 3,50% | 2.703.771 | |||||
| Due date: 31 - 60 days | 38.610.200 | 8,00% | 3.088.816 | |||||
| Due date: 61 - 90 days | 19.250.600 | 16,00% | 3.080.096 | |||||
| Due date: older than 91 days | 6.500.200 | 75,00% | 4.875.150 | |||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Auditing IT Infrastructures For Compliance
Authors: Robert Johnson, Marty Weiss, Michael G. Solomon
3rd Edition
1284236609, 9781284236606
