Answer:
Cordova, Inc.
1. Bad Debt Expense account of $41,800 will also appear in Cordova's 2021 income statement.
2. Receivables Turnover ratio = 4.32
Explanation:
a) Data and Calculations:
Partial Balance Sheet of Cordova, Inc.:
Current assets:
Accounts receivable, net of $45,000 in allowance for
uncollectible accounts $ 377,000
Interest receivable 15,000
Notes receivable 350,000
Notes Receivable:
Dated October 31, 2020, payable October 31, 2021 = $120,000
Dated March 31, 2020, payable March 31, 2021 = 230,000 (8%)
Total Notes Receivable = $350,000
Accounts receivable:
Beginning balance $422,000
Sales Revenue = 2,050,000
Cash collections 1,910,000
Bad Debts w/off 34,000
Ending balance = $528,000
Allowance for Uncollectible accounts:
Beginning balance $45,000
Bad debts w/off (34,000)
Bad debts expense 41,800
Ending balance (52,800)
Receivables Turnover ratio = Sales Revenue/Average Receivables
= $2,050,000/$475,000
= 4.32
Average Receivables = ($422,000 + $528,000)/2 = $475,000
