QUESTION 1

Presented below is information from Strong Computers Bhd

July 1

Sold RM30,000 of computers to Smallwood Sdn Bhd with terms 3/15, n/60. Strong Computers uses the gross method to record cash discounts.

10

Strong Computers received payment from Smallwood for the full amount owed from the July transactions.

17

Sold RM250,000 in computers and peripherals to the Hanan Store with terms of 2/10, n/30.

30

The Hanan Store paid Strong Cpmputers for its purchase of July 17

REQUIRED:

Prepare the necessary journal entries for Strong Computers Bhd.

QUESTION 2

When a company has a policy of making sales for which credit is extended, it is reasonable to expect a portion of those sales to be uncollectible.As a result of this, a company must recognize bad debt expense.There are basically two methods of recognizing bad debt expense: (1) direct write-off method, and (2) allowance method.

REQUIRED:

(a)Describe fully both the direct write-off method and the allowance method of recognizing bad debt expense.

(b)Discuss the reasons why one of the above methods is preferable to the other and the reasons why the other method is not usually in accordance with IFRS

QUESTION 3

DuniaBaru Berhad 1 January 2019 balance in the Allowance for Doubtful Accounts of RM10,000. During 2019, it wrote off RM7,200 of accounts and collected RM2,100 on accounts previously written off. The balance in Accounts Receivable was RM200,000 at 1 January and RM240,000 at 31 December. At 31 December 2019, DuniaBaru Berhad estimates that 5% of accounts receivable will prove to be uncollectible. How much is Bad Debt Expense for 2019?

QUESTION 4

Accounts receivable in the amount of RM250,000 were assigned to the Fast Finance Company by Marsh Bhd., as security for a loan of RM200,000. The finance company charged a 4% commission on the face amount of the loan, and the note bears interest at 9% per year.

During the first month, Marsh Bhd collected RM130,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note.

REQUIRED:

Make all the entries for Marsh Bhd. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company.

QUESTION 5

On 1 September 2019, PANDEKA Bhd used its receivables totalling RM 350,000 as collateral on a 250,000, 15% note from Intelligent Bank. PANDEKA Bhd will continue to collect the assigned receivables. Intelligent Bank will charge 2% as a finance charge which will be deducted in advance on the 250,000 value of the note. Collections of receivables for September is RM100,000, less cash discounts of RM800. On 1 October, PANDEKA Bhd paid to the bank the amount owed for September collection plus accrued interest. During October, PANDEKA Bhd collected the remaining accounts except for RM550 written off as uncollectible. On 1 November, PANDEKA Bhd paid to Intelligent Bank the remaining account owed plus accrued interest.

REQUIRED:

Prepare the journal entries necessary for both PANDEKA Bhd and Intelligent Bank.

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