Question

Question 1:

Trade Receivable RM 690,500

Allowance for doubtful Debt RM 69,050

Bad Debt Expense RM 34,525

Additional Information:

a) Sales on account of RM 7,980,000

b) Sales return and allowance RM 150,000

c) Collections of trade receivable of RM 5,520,000

d) The estimated bad debts expense is 5% or trade receivable

Record

1. Journalize all transactions for year 2019.

Question 2

Computer Software RM 1,170,500

Amortization expense-Computer Software RM 156,060

Additional Information:

a) The company uses straight line amortization method for all intangible assets that are subject to amortization.

b) On 1 January 2019, RK Company acquired a patent for RM 300,000. The estimated useful life of the patent is 20 years from the date of acquisition. However, the entity will consume the patent's future economic benefits evenly over 15 years from the date of acquisition.

c) The estimated annual amortization of computer software is 20%

Record

a) Journalize all transactions for year 2019

Question 3

i) RK Company uses the periodic inventory system

ii) A physical count of inventory on 31 December 2019 revealed that company had inventory on hand amounted to RM 1,580,790

iii) The net realizable value of inventory on 31 December 2019 is RM 1,472,350.

Record:

1.Journalize all transaction for year 2019.

Answer 1

Allowance for doubtful debts is created by forming a credit balance which is netted off against the total receivables appearing in the balance sheet. A corresponding debit entry is recorded to account for the expense of the potential loss. Accounting entry to record the allowance for receivable is as follows:

DebitAllowance for Doubtful Debts (Expense)

CreditAllowance for Doubtful Debts (Balance Sheet)

Once an allowance for doubtful debts has been created, only the movement in the allowance will need to be charged to the income statement in future accounting period. So if estimated allowance for doubtful debt is same as last accounting period, no accounting entry will be required in the current period as the total receivables will be reduced by the amount of allowance which has already been created.

Example

ABC LTD has trade receivable of worth $50,000 as at 31 December 2010. XYZ LTD, a receivable owing $10,000 to ABC LTD at the year end, has been recently been wound up. Consequently, ABC LTD does not expect to recover the amount due from XYZ LTD. Based on past experience, ABC LTD estimates that 5% of its receivables will default. Allowance for doubtful debts on 31 December 2009 was $1500.