QUESTION 2 (20 MARKS) A. "According to MFRS 139, trade receivables are initially recognised when the entity becomes a party to the contractual provisions of the instruments. On top of that according to MRFS 136, an entity should report their assets at no more than their recoverable amount. Therefore, business often create an allowance for doubtful debts. (i) Explain the accounting concept related to the above statement. (3 marks) (ii) What is the purpose of creating an allowance for doubtful debts? (3 marks) (iii) How might the amount of an allowance for doubtful debts be calculated? (6 marks) B. On 1 January 2019 there was a balance of RM500 in the Allowance for Doubtful Debts Account, and it was decided to maintain the provision at 5% of the accounts receivable at the end of year. The account receivable on 31 December each year were: 2017 2018 2019 RM12,000 RM8,000 RM8,000 Construct the extracted Statement of Profit or Loss for the year ended 31 December 2019. (3 marks) C. On 1 January 2019 Warda owed Jana RM130. On 25 August 2019 Warda was declared bankrupt. A payment of 30 cents was received in full settlement. The remaining balance was written off as bad debt. Comment on the statement. (5 marks)