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Identity the financial instrument involved and state date

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Reference no: EM132919238

Happy Bhd is in the business of wholesaling office equipments. On 1 August 2009, a customer, Yuppy, placed an order for 20 units of equipments at RM40,000 per unit. The equipments were delivered on 15 September 2009. By 31 December 2009, Yuppy has paid RM500,000 of the amount owed. Happy Bhd has a legal obligation to donate RM300,000 each year to a charitable body, XYZ Charity.

On 6 September 2010, Happy Bhd and Yuppy came to an agreement for Yuppy to remit the remaining amount owed directly to XYZ Charity. XYZ Charity was informed of this agreement which also stated that, in the event Yuppy failed to deliver the said amount, Happy Bhd has no obligation whatsoever to deliver the cash. XYZ Charity agreed to the arrangement. The company's financial year ends on 31 December.

Required:

In the context of FRS 139 Financial Instruments: Recognition and Measurement:

Problem (i) Identity the financial instrument involved and state the date at which initial recognition took place. Show journal entries for the initial recognition.

Problem (ii) Explain whether or not Happy Bhd should derecognise the financial instrument related to the donation on 6 September 2010. Show the related journal entries.

Reference no: EM132919238

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