As at 31 December 2019, TopSteamer has accounts receivables of HK$1,500,000. During the audit of sales and accounts receivable balances, you identified that Gobetter, a major customer of the company has a balance of HK$300,000 overdue for more than one year. You have serious concerns about the collectability of the amount from Gobetter and suggested TopSteamer to make a full provision for this customer. Since TopSteamer has substantial income this year, so the management agreed and made the full provision for Gobetter as suggested in the draft financial statements. However, Gobetter settled HK$150,000 to TopSteamer on 15 February 2020. Assume TopSteamer has not made any entry or disclosure for the subsequent events, describe and explain the nature of adjusting entries or disclosure, if any, you would suggest TopSteamer to make for each of the above situations

Answer rating: 100% (QA)

For the first situation where TopSteamer made a full provision for Gobetters overdue amount of HK300... View the full answer