Draft loss for year: 320. Adjustments needed: (1) Irrecoverable debts of 930 recovered; (2) Existing allowance 520, required allowance = 5% of trade receivables 9,600. What is the revised profit or loss?

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SSC Financial and Cost Accounting P-1 QUESTION #6111

Question 1

Draft loss for year: $320. Adjustments needed: (1) Irrecoverable debts of $930 recovered; (2) Existing allowance $520, required allowance = 5% of trade receivables $9,600. What is the revised profit or loss?

Loss of $1,210
Loss of $1,730
Profit of $130
Profit of $650✔️

Correct Answer Explanation

Option D (Profit of $650) is correct.

Recovery of debt: +$930

Required allowance = 5% × $9,600 = $480; Reduction = $520 − $480 = +$40

Revised = −$320 + $930 + $40 = +$650 profit

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