Best Bake makes a variety of cakes, for its local and overseas market.    The entity has a financial year end of 30 June.  During the year ended 30 June 2020, Best Bake had the following transactions:

1. Best Bake owns 3 delivery vans which were acquired 2 years ago.  The retail price of each van was RM82,000.  Best Bake acquired them at RM80,000 each.

2. It also owns a list of regular customers within and outside Sarawak.  Included in the list are 10 customers, bought over from Sedap Bakery for RM100,000.  Sedap Bakery was a competitor, but the owner has decided to migrate and closed down the business.   Best Bake estimated the value of its total listed customers (including the 10 bought over) at RM750,000.

3. On 29 June 2020, in view of a forthcoming festival in July 2020, Best Bake paid in advance half of July’s salaries to its workers to the sum of RM10,000.  This amount was included in the salary expense account.

 

Required:

1. Explain, with justifications, how each of the above items should be identified and classified.  Show journal entries to initially recognize and measure each item (Narrations not required).  

2. During the year, Best Bake made total sales of RM970,000, of which RM600,000 were sales on credit.  In the context of the Conceptual Framework, explain under what category of the financial statement elements is:

1. the total sales amount, and
2. the sales on credit.