COURSE: DIPLOMA IN ACCOUNTING

SUBJECT: FINANCIAL ACCOUNTING & REPORTING

I NEED ANSWER FOR A, B AND C

QUESTION 2 Cahaya Kasih Bhd is a company specializing in children's clothing situated at Kuala Kangsar, Perak. Most of the sales are on credit basis. The credit term is 4/15, net 30 . The following is a summary of transactions which occurred during the year ended 31 December 2014. 1. On 25 January 2014 , the company sold goods worth RM4,500 on credit to Ferries Boutique. The company was entitled to a trade discount of 2% on the goods purchased. 2. On 20 February 2014 , the company received a cheque of 80% from the amount owed by Ferries Boutique. 3. On 10 October 2014, the company sold goods worth RM10,300 to Cempaka Wholesale. Cempaka Wholesale paid 10% of the amount and the balance was to be settled the following month. 4. On 11 November 2014, Cempaka Wholesale settled the amount due. Required: a. Explain whether or not the business transactions between Cahaya Kasih Bhd and their customers give rise to financial assets. (2 marks) ii. Explain the amount of Ferries Boutique's receivable to be recognised on the sales date. (3 marks) b. Discuss the TWO (2) methods used in estimating the allowance for impairment of trade receivables. (5 marks) c. The total receivables of Cahaya Kasih Bhd at 31 December 2014 was RM45,000. The allowance for impairment of trade receivables on 1 January 2014 was RM4,250. The company decided to provide the allowance for impairment of trade receivables at 7% of trade receivables. During the year 2014 , the company received a cheque amounting to 75% of the RM15,000 owned by Gembira Kids Store and write off the remaining balance as bad debts. The company also received RM5,000 from Cekal Enterprise for the amount previously written off as bad debts. These transactions have not yet been recorded in the books. Evaluate the situation above on the amount of allowance for impairment of trade receivables AND accounts receivable as at 31 December 2014. (5 marks) (Total: 15 marks)