Chamberlain Enterprises Inc. reported the following receivables in its December

Question

Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2016, year-end balance sheet:

Additional Information:

1.  The notes receivable account consists of two notes, a $60,000 note and a $200,000 note. The $60,000 note is dated October 31, 2016, with principal and interest payable on October 31, 2017. The $200,000 note is dated June 30, 2016, with principal and 6% interest payable on June 30, 2017.

2.  During 2017, sales revenue totaled $1,340,000, $1,280,000 cash was collected from customers, and $22,000 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 accounts receivable.

3.  On March 31, 2017, 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 2017 income statement?

2.  What amounts will appear in the 2017 year-end balance sheet for accounts receivable?

3.  Calculate the receivables turnover ratio for 2017.

Current assets:    Accounts receivable, net of $24,000 in allowance for        uncollectible accounts $218,000    Interest receivable       6,800    Notes receivable   260,000

Explanation / Answer

1.

Bad debt expense:

Interest revenue of 5760 on two note receivables.

workings:

2. AR balance:

3.

accounts receivables turn over= sales/ average accounts receivable =1340000/ (242000+280000)/2 = 5.13

Accounts receivable Opening 242000 Add sales 1340000 Less collection -1280000 Less written off -22000 Closing 280000 Rate of allowance 10% Allowance balance required 28000 Unadjusted balance in books Opening balance 24000 Less written off -22000 a Unadjusted balance in books 2000 b Balance required 28000 c=b-a Bad debt expense 26000

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