QUESTION 3 Glove Bhd sells rubber gloves and operates in Bukit Kayu Hitam. The company closes its accounts on 31 December each year. The following information is related to the company's equity and debt investments for the financial year 2019. Date 2 January Glove Bhd purchased Transaction RM2,000,000 of from Purnama Bhd for RM2,162,200. The bonds mature in five years and provide the bondholders with a yield of 8%. The interest is paid by Purnama Bhd every 30 June and 1 January. The bonds have been 10% bonds classified as held for collection (HFC). 21 February Glove Bhd purchased 100,000 of Bulan Bhd for RM1.25 per share. The brokerage and clearance fee for the purchase of the shares is 3% of the value of the shares. Glove Bhd foresees that the share price of Bulan Bhd shall increase in the next few years and thus, the company intended to hold the units ordinary shares shares for at least 18 months. 30 November Due to a shortfall of cash, Glove Bhd sold its investments in Purnama Bhd at RM2,050,000. The selling price includes accrued interest. 31 December Bulan Bhd declared a dividend of RM0.05 per share, payable in January 2020. The share price of Bulan Bhd was traded at RM1.45 on this date. REQUIRED: (Round all numbers to the nearest RM) a) Prepare all the related joumal entries for Glove Bhd for the financial year 2019. b) Briefly discuss whether (i) trade receivable and (ii) bank overdraft fulfill the definition of financial assets.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
REQUIRED:
(Round all numbers to the nearest RM)
a) Prepare all the related journal entries for Glove Bhd for the financial year 2019.
b) Briefly discuss whether (i) trade receivable and (ii) bank overdraft fulfill the definition of financial assets.
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