Answer:
Chamberlain Enterprises, Inc.
1. In addition to sales revenue, the revenue and expense amounts related to the receivables that will appear in Chamberlain’s 2021 income statement
Bad debts expense $39,700
Interest revenue on the $200,000 notes $4,000
Bank Finance Fee $16,000
2. The amounts that will appear in the 2021 year-end Balance Sheet for accounts receivable (net) is:
Accounts receivable $327,000
Allowance for uncollectible -32,700
Net accounts receivable $294,300
3. The receivables turnover ratio for 2021:
= 5.2 times
Explanation:
a) Data and Calculations:
December 31, 2020
Current assets:
Accounts receivable, net of $24,000 in allowance for
uncollectible accounts $218,000
Interest receivable 6,800
Notes receivable 260,000
Total receivables $484,800
Notes receivable:
October 31, Note = $60,000 payable on October 31, 2021
March 31, 2020 Note = $200,000 payable on March 31, 2021
T-accounts:
Accounts receivable
Date Account Titles Debit Credit
12/31/20 Beginning balance $218,000
12/31/21 Sales revenue 2,020,000
12/31/21 Cash $1,880,000
12/31/21 Allowance for uncollectibles 31,000
12/31/21 Ending balance 327,000
Interest receivable
Date Account Titles Debit Credit
12/31/20 Beginning balance $6,800
Notes receivable
Date Account Titles Debit Credit
12/31/20 Beginning balance $260,000
Allowance for uncollectible accounts
Date Account Titles Debit Credit
12/31/20 Beginning balance $24,000
12/31/21 Accounts receivable $31,000
12/31/21 Bad debts expense 39,700
12/31/21 Ending balance 32,700
Interest on $200,000 notes receivable at 8%:
= $16,000 per year
= $1,333 monthly
Interest due on the $200,000 note, for January 1, 2021 to March 31, 2021 = $4,000
Transactions Analysis:
Accounts receivable $2,020,000 Sales Revenue $2,020,000
Cash $1,880,000 Accounts receivable $1,880,000
Allowance for Uncollectible Accounts $31,000 Accounts receivable $31,000
Bad debts expense $39,700 Allowance for Uncollectible Accounts $39,700
Bank Finance Fee $16,000 ($200,000 * 8%)
Receivables in 2020 = $484,800
Receivables in 2021 = 294,300
Total receivables = $779,100
Average receivables = $389,550 ($779,100/2)
Credit Sales/Average receivable
= $2,020,000/$389,550
= 5.2 times.
