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Assignment (2)

Deadline: Saturday 06/11/2021 @ 23:59

For Instructor’s Use only

Instructions – PLEASE READ THEM CAREFULLY

· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

· Assignments submitted through email will not be accepted.

· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism.

· Submissions without this cover page will NOT be accepted.

Assignment Question(s): (Marks 5)

Q1. When a company has a policy of making sales for which credit is extended, it is reasonable to expect a portion of those sales to be uncollectible. As a result of this, a company must recognize bad debt expense. There are basically two methods of recognizing bad debt expense: (1) direct write-off method, and (2) allowance method.

Instructions

(a) Describe carefully both the direct write-off method and the allowance method of recognizing bad debt expense, give a numerical example with the journal entry for each method. (1.5 marks)

(b) Discuss the reasons why one of the above methods is preferable to the other and the reasons why the other method is not usually in accordance with IFRS. (0.5 mark)

Q2. Presented below is financial information related to Abdallah Company:

Revenue SAR950,000

Comprehensive income 140,000

Net income 105,000

Income from operations 260,000

Selling and administrative expenses 600,000

Income before income tax 240,000

Compute the following: (a) other income and expense, (b) financing costs, (c) income tax, and (d) other comprehensive income. (1 mark)

Q3. Ahmed Co. records purchase discounts lost (net method) and uses perpetual inventories. Prepare journal entries in general journal form for the following:

(a) Purchased merchandise costing SAR 1000 with terms 2/10, n/30. (0.5 mark)

(b) Payment was made thirty days after the purchase. (0.5 mark)

Q4. The December 31, 2016 inventory of ABC Company consisted of four products, for which certain information is provided below.

Estimated Expected

Product Original Cost Completion Cost Selling Price

A SAR25 SAR10 SAR40

B SAR42 SAR20 SAR58

C SAR120 SAR40 SAR150

D SAR18 SAR5 SAR26

Using the lower-of-cost-or-net realizable value approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2016. (1 mark)

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