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Chamberlain Enterprises, Inc. reported the following receivables in its December 31, 2020, year-end balance sheet:
Current assets:
Accounts receivable, net of $24,000 in allowance for
uncollectible accounts $218,000
Interest receivable 6,800
Notes receivable 260,000
Additional information:
1. The notes receivable account consists of two notes, a $120,000 note and a $200,000 note. The $120,000 note is dated October 31, 2020, with principal and interest payable on October 31, 2021. The $200,000 note is dated March 31, 2020, with principal and 8% interest payable on March 31, 2021.
2. During 2021, sales revenue totaled $2,020,000, $1,880,000 cash was collected from customers, and $31,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the allowance account to an amount equal to 10% of year-end gross accounts receivable.
3. On March 31, 2021, the $200,000 note receivable was discounted at the Bank of Commerce. The bank’s discount rate is 8%. Chamberlain accounts for the discounting as a sale.
Required:
1. In addition to sales revenue, what revenue and expense amounts related to receivables will appear in Chamberlain’s 2021 income statement?
2. What amounts will appear in the 2021 year-end balance sheet for accounts receivable?
3. Calculate the receivables turnover ratio for 2021.

Respuesta :

anthougo

Answer:

Chamberlain Enterprises, Inc.

1.  In addition to sales revenue, the revenue and expense amounts related to the receivables that will appear in Chamberlain’s 2021 income statement

Bad debts expense                                    $39,700

Interest revenue on the $200,000 notes  $4,000

Bank Finance Fee                                      $16,000

2. The amounts that will appear in the 2021 year-end Balance Sheet for accounts receivable (net) is:

Accounts receivable         $327,000

Allowance for uncollectible -32,700

Net accounts receivable  $294,300

3. The receivables turnover ratio for 2021:

= 5.2 times

Explanation:

a) Data and Calculations:

December 31, 2020

Current assets:

Accounts receivable, net of $24,000 in allowance for

uncollectible accounts $218,000

Interest receivable             6,800

Notes receivable           260,000

Total receivables         $484,800

Notes receivable:

October 31, Note = $60,000 payable on October 31, 2021

March 31, 2020 Note = $200,000 payable on March 31, 2021

T-accounts:

Accounts receivable

Date       Account Titles                 Debit        Credit

12/31/20 Beginning balance    $218,000

12/31/21  Sales revenue         2,020,000

12/31/21  Cash                                             $1,880,000

12/31/21  Allowance for uncollectibles              31,000

12/31/21  Ending balance                                327,000

Interest receivable

Date       Account Titles                 Debit      Credit

12/31/20 Beginning balance       $6,800

Notes receivable

Date       Account Titles                 Debit      Credit

12/31/20 Beginning balance  $260,000

Allowance for  uncollectible accounts

Date       Account Titles                 Debit      Credit

12/31/20 Beginning balance                       $24,000

12/31/21  Accounts receivable   $31,000

12/31/21  Bad debts expense                       39,700

12/31/21  Ending balance            32,700

Interest on $200,000 notes receivable at 8%:

= $16,000 per year

= $1,333 monthly

Interest due on the $200,000 note, for January 1, 2021 to March 31, 2021 = $4,000

Transactions Analysis:

Accounts receivable $2,020,000 Sales Revenue $2,020,000

Cash $1,880,000 Accounts receivable $1,880,000

Allowance for Uncollectible Accounts $31,000 Accounts receivable $31,000

Bad debts expense $39,700 Allowance for Uncollectible Accounts $39,700

Bank Finance Fee $16,000 ($200,000 * 8%)

Receivables in 2020 = $484,800

Receivables in 2021 =   294,300

Total receivables =       $779,100

Average receivables = $389,550 ($779,100/2)

Credit Sales/Average receivable

= $2,020,000/$389,550

= 5.2 times.

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