Question

Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2021, year-end balance sheet:

Current assets:
Accounts receivable, net of $31,000 in allowance for uncollectible accounts	$	253,000
Interest receivable		7,450
Notes receivable		330,000

Additional Information:

1. The notes receivable account consists of two notes, a $80,000 note and a $250,000 note. The $80,000 note is dated October 31, 2021, with principal and interest payable on October 31, 2022. The $250,000 note is dated June 30, 2021, with principal and 5% interest payable on June 30, 2022.
2. During 2022, sales revenue totaled $1,410,000, $1,315,000 cash was collected from customers, and $29,000 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, 2022, the $250,000 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 2022 income statement?
2. & 3. What amounts will appear in the 2022 year-end balance sheet for accounts receivable and Calculate the receivables turnover ratio for 2022.

Req 1 Req 2 and 3 Not including sales revenue, what revenue and expens income statement? Income Statement for 2022 Revenue: Expense:

Answer 1

Interest rate on the 80000 note can be determined as follows; 19 20 Interest Receivable in 12/31/21 Balance Sheet 21 7450 Less interest on 250000 note (250000 *5%*6/12) 6250 22 1200 23 Interest on 80000 note 24 1200 represents interest for two months or (1200/2) 600 per month.Annual interest is 25 (600 12)7200 26 27 Rate of Interest (7200/ 80000) 9.00% 28 29 Interest revenue on notes: 80000*9%*10/12 30 31 32 On 80000 note 6000 On 250000 note 33 3125 Total Interest Revenue 34 9125 35 st

Bad Debts expense 36 37 Analysis of Accounts Receivable 38 39 Beginning Accounts Receivable (253000+31000) 284000 40 41 Add Credit Sales 1410000 Less Cash Collections 42 -1315000 write-off 43 -29000 Ending Accounts Receivable 44 350000 45 Analysis of allowance for uncollectible accounts 46 47 Beginning Allowance Less Write-offs 48 31000 -29000 49 Ending Allowance (350000*10%) 35000 50 Bad Debts expense (35000+29000-31000) 51 33000 52.

Loss on sale of Notes Receivable 53 54 Interest accrued (250000*5%*9/12) 55 9375 56 Calculation of cash proceeds received from disounting note; 57 58 59 Face amount 250000 Interest on maturity (250000*5%) 60 12500 Maturity Value Discount (262500*8%*3/12) 61 262500 62 -5250 Cash Proceeds 63 257250 64 Carrying Value of note (250000+9375) 65 259375 Less Cash Proceeds -257250 66 Loss on Sale of notes receivable 67 2125 68 69 Income Statement For 2022 70 Revenue; 71. Interest Revenue 9125 72 Expense; Bad Debts expense 73 33000 Loss on Sale of notes receivable 74 2125 75 Net Loss -26000 76

77 Accounts Receivable,net of 35000 in allowance for uncollectibe 315000 (350000-35000) 78 79 Receivable Turnover Ratio 1410000 (284000+350000)/2 80 81 82 350000 83 317000 84 85 1.10