CIMA Exam CIMAPRA17-BA3-1 Topic 1 Question 89 Discussion

Actual exam question for CIMA's CIMAPRA17-BA3-1 exam

Question #: 89
Topic #: 1

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

Show Suggested Answer

Suggested Answer: D

by Sheridan at May 30, 2024, 02:07 AM

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Kimberlie

6 months ago

I'm feeling confident about C. The receivables might stay the same, but the profits are definitely going to take a hit since the company can't collect on that debt. Accountants, am I right? *laughs*

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Lindsey

5 months ago

Yeah, I agree. It's important to adjust for events like this to accurately reflect the financial position of the company.

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Lavonda

5 months ago

I think you're right, C seems like the most logical choice. The profits will definitely decrease without that payment.

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Luz

6 months ago

Hmm, this is a tricky one. I'm torn between B and D, but I think I'll go with B. Gotta love those allowances for doubtful accounts, am I right? *winks*

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Jennifer

5 months ago

Yeah, I think B is the correct answer. Good choice!

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German

5 months ago

I agree, that sounds right. It's all about those doubtful accounts.

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Gabriele

6 months ago

I think the impact is that receivables decrease and allowance increases.

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Catarina

6 months ago

I disagree, I believe the correct answer is D) Receivables decrease and profits decrease.

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Kristofer

6 months ago

I think the answer is B) Receivables decrease and allowance increases.

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Mammie

7 months ago

I'm going with D. If the customer has gone into liquidation, the receivables would decrease and the profits would also decrease since the company won't be able to collect on that debt.

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Audra

7 months ago

Option B seems like the correct answer here. The receivables would decrease as the customer is unable to pay, and the allowance for doubtful accounts would increase to account for the potential loss.

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Lavonda

5 months ago

Yes, that makes sense. The allowance for doubtful accounts would need to increase to reflect the potential loss from the customer going into liquidation.

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Robt

5 months ago

I agree, option B is the correct answer. The receivables would indeed decrease in this situation.

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Katina

6 months ago

Yes, that makes sense. The allowance for doubtful accounts would need to increase to reflect the potential loss from the customer going into liquidation.

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