Ulrich prepares his accounts to 31 July each year. At 31 July 2012 his trade receivables list totals £ XXXXXXXXXXIncluded in the list is an amount of £17 000 owing by Gayle Associates. Gayle...

Ulrich prepares his accounts to 31 July each year. At 31 July 2012 his trade receivables list totals £397 700. Included in the list is an amount of £17 000 owing by Gayle Associates. Gayle Associates has recently ceased to trade and Ulrich has been told by Gayle’s administrator that there is little likelihood of him ever recovering the £17 000 owing to him.

Because of the recession, Ulrich is concerned that some of the businesses that owe him money could run into difficulties. He decides to make a general allowance for doubtful debts of 1% of receivables balances that have been outstanding for more than 3 months at 31 July 2012 (excluding the £17 000 owed by Gayle). He has never previously made an allowance against receivables.

An analysis of Ulrich’s receivables at 31 July 2012 shows the following:

How will trade receivables be presented in Ulrich’s statement of financial position at 31 July 2012? What is the effect of bad and doubtful receivables on Ulrich’s profit for the year?