Blade Limited is a furniture manufacturing company. The company was informed on 1 February 19X7 that one of its major customers, Greenwood Limited, had gone into liquidation. The liquidator indicated that no payments would be made to unsecured creditors. The amount owed by Greenwood Limited on 1 February 19X7 amounted to €55,000, of which €30,000 related to goods invoiced on 10 December 19X6 and

€25,000 to goods invoiced on 15 January 19X7.

Requirement Prepare a memorandum for the Board of Directors in which you, acting as auditor, should explain how the above item should be dealt with in the financial statements of Blade Limited for the year ended 31 December 19X6.