Accounting for Trade Receivables Quiz

Kelvin’s trade receivables (TR) as at 31 December is RM28,000. A bad debt of RM1,200 has been written off from the TR. He is of the opinion that about 3% of this outstanding balance will not be able to be collected and he wants to make an appropriate allowance to reflect the uncertainty. How much would be shown as the allowance for doubtful debts in the SOFP of the same date?

• RM28,000 x 3% = RM840

• (RM28,000 - RM1,200) x 3% = RM804

• RM1,200 x 3% = RM36

At the end of the year, Coleen has an amount of RM180,600 outstanding from TR. There is a bad debt of RM1,400 to be written off in addition to an amount of RM900 which has been written off earlier. She has never made any allowance for doubtful debts (AFDD) prior to this but her experience indicates that 2% will be become irrecoverable. What is the amount of AFDD that should appear in the SoFP?

• RM180,600 x 2% = RM3,612

• (RM180,600 - RM 1,400) x 2% = RM3,584

• (RM180,600 - RM 1,400 + RM 900) x 2% = RM3,602

• (RM180,600 - RM 1,400 - RM900) x 2% = RM3,566

Bibianna Trading provided the following information as at 31 December: TR RM71,800 ; Allowance for doubtful debts (AFDD) (b/d) RM2,600. There are further debts amounting to RM840 to be written off. AFDD for the year end 31 Dec is RM3,548. What is the amount of Doubtful Debts in the SoPL?

• RM3,548 – RM2,600 = RM948 (increase in doubtful debt : expense)

• RM3,548 - RM2,600 - RM840 = RM108 (increase in doubtful debt : expense)

• RM3,548 - RM2,600 + RM840 = RM1,788 (decrease in doubtful debt : income)

• RM3,548 – RM2,600 = RM948 (decrease in doubtful debt: income)

Bibianna Trading provided the following information as at 31 December: TR RM71,800 ; Allowance for doubtful debts (AFDD) (b/d) RM2,600. There are further debts amounting to RM840 to be written off. AFDD for the year end 31 Dec is RM3,548. What is the amount of AFDD in the SoFP at year end?

• SFP (doubtful debts) = RM2,600 (closing balance)

• SFP (doubtful debts) = RM3,548 (closing balance)

• SFP (allowance for doubtful debts) = RM2,600 (closing balance)

• SFP (allowance for doubtful debts) = RM3,548 (closing balance)

A company estimates that RM20,000 of its RM500,000 of TR will be uncollectible at the end of the year. Its AFDD b/d is RM13,000. What is the double entry?

• Dr. Doubtful Debt (Increase)RM13,000

  Cr. AFDD RM13,000

• Dr. AFDD RM13,000

  Cr. Doubtful Debt Decrease) RM13,000

• Dr. Doubtful Debt (Increase)RM7,000

  Cr. AFDD RM7,000

• Dr. AFDD RM7,000

  Cr. Doubtful Debt Decrease) RM7,000