Discuss CIMA CIMAPRA17-BA3-1 Exam Topic 3 Question 129

In the year ended 31 December 20X1, XYZ receives an email confirming that a major customer has gone into liquidation and will be unable to pay its suppliers.

Which of the following is the impact of adjusting for this event?

AProfits increase and allowance increases.

BReceivables decrease and allowance increases

CReceivables unchanged and profits decrease

DReceivables decrease and profits decrease

Suggested Answer: D

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24 comments · newest first

Romana 1 day ago

Exactly! B captures the full impact.

Teri 6 days ago

Yeah, C doesn’t account for the allowance.

Melodie 12 days ago

I feel like C is too simplistic.

Emilio 17 days ago

True, but B covers both aspects well.

Jade 22 days ago

But what about D? Profits decrease too.

Mona 27 days ago

I agree, B seems right. Receivables must decrease.

Romana 1 month ago

This is tough. I think B makes sense.

Kristofer 1 month ago

I feel B is more precise for this scenario.

Tambra 1 month ago

Still, D shows the overall impact clearly.

Marge 2 months ago

Exactly, we need to account for the bad debt.

Sol 2 months ago

True, but B captures the allowance increase well.

Kristofer 2 months ago

But if we adjust, profits should reflect the loss.

Tambra 2 months ago

D seems right too. Receivables and profits both drop.

Marge 2 months ago

I agree, B makes sense. The customer can't pay.

Sol 2 months ago

I think it's B. Receivables decrease and allowance increases.

Jerry 3 months ago

Not sure about this, seems like profits should drop.

Graciela 3 months ago

Totally agree with B, makes the most sense!

Martina 3 months ago

Wait, how can profits increase in this situation?

Viva 3 months ago

I think it's D) Receivables decrease and profits decrease.

Corrina 3 months ago

Definitely B) Receivables decrease and allowance increases.

Dallas 3 months ago

I thought that if a customer goes into liquidation, we have to decrease both receivables and profits, but I can't recall the exact details.

Gaston 4 months ago

I remember that when we increase the allowance for doubtful accounts, it usually means profits decrease. So maybe it's option D?

Shawnda 4 months ago

I'm a bit unsure, but I feel like if the customer can't pay, we definitely need to adjust the receivables down.

Dannie 4 months ago

I think this is similar to a practice question we did on bad debts, where we had to adjust receivables based on customer defaults.

CIMAPRA17-BA3-1 Exam - Topic 3 Question 129 Discussion