The company, Rafflesia Bhd is using the allowance method in

The company, Rafflesia Bhd is using the allowance method in estimating uncollectible receivables. Due to the economic slowdown, Raflesia Bhd decided to increase the allowance for impairment of trade receivables by 0.1% of total credit sales. 40% of the total revenue represent total credit sales for the year 2020. On 31 December 2020, one of the customers, Samudera Sdn Bhd with an outstanding balance of RM150,000 was declared bankrupt. Only 60%of the amount owed is collected. The finance directors decided to write off the remaining amount as uncollectible.

Allowance for impairment of trade receivables as at 1 January 2020 = RM 520

BALANCE AT 31 December 2020

Trade receivable = RM 10,005

Revenue = RM 486,000

Required:

a) Explain whether Raflesia Bhd should derecognize Samudera Sdn Bhd from the company’s book.

b) Prepare Statement of Allowance for impairment of Trade receivable to be disclosed in the Financial Statement for the year ended 31 December 2020.


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