QUESTION 1

Magnetic-Tech Bhd is a public company that sells IT-gadgets based products. Followings are
information regarding its credit sales transaction in March 2019.

Date Transactions
3 March Sold 250 units of Smart Home Camera, 100 units of Mini Car DVR Camera
and 500 units of Mini GPS Tracker to Hijrah Yusman Bhd. The sales price
per unit of the Smart Home Camera, Mini Car DVR Camera and Mini GPS
Tracker are RM400, RM350 and RM300 respectively. Hijrah Yusman was
given trade discounts of RM2,000 for the Mini GPS Tracker. The credit term
is 4/30, n/60.
14 March Received 5 units of Mini Car DVR Camera from Hijrah Yusman Bhd. The
units were returned as defective items. Magnetic-Tech Bhd agreed to reduce
the outstanding amount owed by Hijrah Yusman for the total amount of the
defective units.
28 March Received full payment from Hijrah Yusman Bhd.

Additional information:

Magnetic-Tech Bhd uses gross method to record sales discounts.

REQUIRED:

(Please show your calculation)

(a) Prepare necessary journal entries related to account receivable for the above
transaction.

(b) Short-term receivables are shown at net realizable value. Briefly explain the meaning
of net realizable value and how it can be determined.

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

REQUIRED:
Prepare the journal entries necessary for both WWF Bhd and Intelligent Bank.

QUESTION 3

On 31 December 2019, the balance in Dunia Baru Berhad’s accounts receivable was
RM156,000 and Allowance for doubtful account (before adjustment) was RM16,320. The
information on the age of receivables is as follows:

Days Account Outstanding Amount Estimated % uncollectible

Less than 15 days RM56,000 2%
16 – 30 days RM46,000 10%
31 – 45 days RM39,000 25%
46 – 60 days RM15,000 40%

REQUIRED:
(a) Determine the appropriate balance of allowance for doubtful account on 31 December
2019.
(b) Prepare the related journal entries for bad debt expense.