Question

Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2021, year-end balance sheet: Current assets: Accounts receivable, net of $43,000 in allowance for uncollectible accounts Interest receivable Notes receivable $313,000 16, 10e 450, eee Additional Information: 1 The notes receivable account consists of two notes, a $95.000 note and a $355.000 note. The $95.000 note is dated October 31 2021 with principal and interest payable on October 31, 2022. The $355.000 note is dated June 30, 2021. with principal and 8% interest payable on June 30, 2022. 2. During 2022, sales revenue totaled $1,530,000, $1,375,000 cash was collected from customers, and $41,000 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 $355,000 note receivable was discounted at the Bank of Commerce. The bank's discount rate is 10% 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

Answer 1

Answer-1: Income Statement for 2022 Revenue: Interest revenue (Note-1) Expense: Bad debt expenses (Note-2) Loss on sale of note receivable (Note-3) $ 16,600 45,000 2,485

Note-1: Interest revenue: $355,000 x 8% 3/12 = $95,000 x 12% 10/12 = 7,100 9,500 16,600 Total

Amount Date of Note receivable Interest rate Interest amount Explanation $ 355,000 Jun 30, 2021 95000 Oct 30, 2021 450000 8% (given) $ 14,200 (355,000 x 8% 6/12) 12%* 1900 (16,100 - 14,200) Total 16100 (given)

Note-2: Bad debt expense: Analysis of account receivable Beginning account receivable ($313,000 + 43,000) $ Add: Credit sales Less: Write off Less: Cash collection Ending account receivable 356,000 1,530,000 41,000 1,375,000 470,000 Analysis of allowance for uncollectible accounts: Beginning allowances Add: Bad debt expense (43,000 - 41,000 + 47,000) Less: Write off Ending allowance 43,000 45,000 41,000 47,000

Note-3: Loss on sale of note receivable: Interest accrued on $355,000 note for 9 months (355,000 x 8% x 9/12) Carrying value of note ($355,000 + 21,300) Less: Cash proceeds Loss on sale of note receivable $ 21,300 376.300 | 373,815 2,485 L Calculation of cash proceeds received from discounting note: Face amount $ 355,000 Interest to maturity ($355,000 x 8%) 28,400 Maturity value 383,400 Discount amount ($383,400 x 10% x 3/12) 9,585 Cash proceeds 373,815

Answer-2: Account receivable, net of $47,000 in allowance for uncollectible accounts = $423,000

Answer-3: (a) Credit sales (b) Avg. account receivable (313,000 + 423,000)/2 Account receivable turnover ratio (a)/ (b) $ $ 1,530,000 368,000 4.16