Question

The Ivanhoe Pub provides catering services to local businesses. The following information was available for The Ivanhoe Pub for the years ended December 31,2019 and 2020. December December 31,2020 31, 2019 2,130 1,690 Cash Accounts receivable 46,200 ? Allowance for doubtful accounts 580 ? 7,860 Other current assets 8,260 38,900 Current liabilities 44,300 201,000 Total credit sales 250,000 190,000 228,000 Collections on accounts receivable Ivanhoe management is preparing for a meeting with its bank concerning renewal of a loan and has collected the following information related to the above balances. 1. The cash reported at December 31, 2020, reflects the following items: petty cash $1,580 and postage stamps $110. The other current assets balance at December 31, 2020, includes the checking account balance of $3,740. 2. On November 30, 2020, Ivanhoe agreed to accept a 6-month, $5,170 note bearing 12% interest, payable at maturity, from a major client in settlement of a $5,170 bill. The above balances do not reflect this transaction. Ivanhoe factored some accounts receivable at the end of 2020. It transferred accounts totaling $10,000 to Final Factor, 3. Inc. with recourse. Final Factor will receive the collections from Ivanhoe's customers and will retain 2% of the balances. Final Factor assesses Ivanhoe a finance charge of 3% on this transfer. The fair value of the recourse liability is $410. However, management has determined that the amount due from the factor and the fair value of the resource obligation have not been recorded, and neither are included in the balances above 4. Ivanhoe charged off uncollectible accounts with balances of $1,420. On the basis of the latest available information, the 2020 provision for bad debts is estimated to be 2.5% of accounts receivable.

Answer 1

Answert accounts receivable ending balance a . Ending balance, 31 Decjaldo (beginning balanc, 31 Dec,2019 + credit saly) - (collections + Amount from faeton + Change of uncollectible acounty where L yo Credit sales - $250,000 collections - $ 228,000 Amount from factor = $ 10,000 ollectible accounts = $1,420 beginning balance, 21 Dec 2019 =$46,200 Now, subetitute values in eno Ending balance, 3. Det, dodo C$46.200+ $ 250,000 )–(* 228.000 + $10,000 + $ 1,480)

= 296200 - 239420 = $ 56,780 sol .: Accounts receivable Ending balance = $56,780 ② Allowance for doubtful Ending balance" Showing balance al det, 200 = (beginning balan ie, 312, 19) ::- (charge de canedloctible accounts) + (bad debt Expense) Where, begining balance 51.De 2019 = $580 Charges do uncollcetible accounts = $1,480 bad debt sepen ez =(456.480x2.54)-(4580 ] +$1,480 =(141995)-(580) + (1,420) = 839.5 +1,420 = 2259.5

Now, substitute values in Egn 2 Ending balance, 31 Dec,2020 = ($ 580) -(1,420) + (2259.5). $ 1419.5 de $1419 sol Allowance for doubtful ending balance = $14191